The European Central Bank raised interest rates by 50 basis points on Thursday, despite the banking crisis that has decimated global financial markets.
ECB head Christine Lagarde increased the benchmark policy rate to 3.5 percent, the deposit facility rate to three percent, and the marginal lending rate to 3.75 percent.
There had been speculation that the ECB would either hit the pause button or raise rates by a lower amount because of what has been happening.
Here is what the Governing Council said in a statement about the banking system:
“The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area. The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”
On the inflation front, the Euro Area annual inflation rate will be released on Friday and it is projected to ease to just 8.5 percent. On a month-over-month basis, the consumer price index is expected to jump 0.8 percent. The core inflation rate is also forecast to surge to 5.6 percent.
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