Bank goes ahead with a 50 bps increase in rates
Rounding off the more important trifecta of central bank hikes, the European Central Bank (ECB) went ahead with a 50 bps increase in rates, affirming a coordinated slowing of hawkish hike quanta but not necessity hawkish hike length. Signalling that inflation will remain higher than its previous forecasts well into 2024 and then still above its 2% target even then, it also downgraded its growth forecasts along with setting a start date for quantitative tightening in March next year. All very weird optics when it acknowledges recessionary and stagflationary threats – continued hiking to kill the inflation monster is its sole collective agenda at the expense of anything else. All three central banks – the Federal Reserve, the ECB and the Bank of England expect their policy rates to be higher by 1% over the next six months. Not a dovish Christmas carol by any means.
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