As inflation continues to climb all around the global central banks have no choice but to respond in kind. The European Central bank announced Thursday morning that they were the latest to jump on the 75 bips bandwagon.
- “The Governing Council today decided to raise the three key ECB interest rates by 75 basis points. This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target. “
Hold the line. The ECB, like the U.S., has also decided to make it clear that rate hikes will continue until inflation has dissipated. “Based on its current assessment, over the next several meetings the Governing Council expects to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations. “
Looking ahead. the ECB has revised upward their inflation predictions for the next three years. They now expected inflation to average 8.1% in 2022, 5.5% in 2023, and 2.3% in 2024.
- Economic growth, on the other hand, saw a downward revision with the ECB staff now expecting the economy to grow by 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024.
In good company. The Bank of Canada announced a 75 basis point hike earlier this week which was the largest hike in 14 years. The US, of course, has already hiked rates by 75 bips at its last two meetings and according to the CME Group’s Fed Watch, the FOMC is 82% likely to hike rates by another 75 bips in two weeks.
