European Central Bank (ECB) president Christine Lagarde has stuck to the script and raised interest rates by another 50 basis points, pushing borrowing costs to the highest level since late 2008.
There was speculation over a smaller 25bps hike, or even a halt in rate hikes altogether, largest due to the mini-crisis engulfing the financial sector following Silicon Valley Bank’s unceremonious demise.
A smaller hike would have been a play to inject some relief into the anxious financial sector, especially given Credit Suisse’s dramatic trading halt after plummeting over 20% on the Zurish exchange yesterday.
But ultimately, Largarde and Co are more concerned over the effects of eurozone inflation, which let’s not forget is still at 8.5% per February’s reading (tomorrow’s read is forecast to stay at 8.5%).
Now the question is: Are more hikes on the way, or is 3.5% the peak?
“Every additional rate hike increases the risk of breaking something,” said Carsten Brzeski, global head of macro at ING.
Brzeski added: “As a result, we expect the ECB to turn more dovish today and in the coming weeks, probably hinting at a slowdown in the pace and size of any further rate hikes.”
However, Fawad Razaqzada, market analyst at City Index and FOREX.com, said: The ECB could deliver more rate hikes, if the financial stability risks subside.”
Largarde’s pending comments at the press conference are sure to be picked over closely.