The central bank for the euro using 19 countries European countries, the ECB, raised its deposit rate by three-quarters points on Thursday, the steepest one-stroke hike in several decades. With this, the key deposit facility interest rate in Europe rose to 1.5 percent and the main refinancing rate to 2 percent, the highest since 2009. The European Central Bank rates had been in negative territory – below zero percent – for eight years ending July 2022.
While announcing the decision, ECB President Christine Lagarde hinted at likely rate hikes in several more meetings in the future, investors now see rates peaking at around 2.6 percent next year, below expectations for close to 3 percent forecast recently. Economists expect a 50 bps hike in December, and a transition towards moving in 25 bps next year as the hiking cycle pivots from ‘policy normalization’ to ‘policy tightening’. The ECB’s interest rate hike invited several political criticisms as the continuous rate increases fear the European economy to push into recession. But, Lagarde stressed her job ‘to get inflation under…
