Undeterred by fears of banking crisis, ECB raises interest rates by 50 basis points – Economics

The European Central Bank (ECB) has called to raise three of its key interest rates by 50 basis points (0.5%), fueled by the ongoing inflation numbers being reported by the EU. Christine Lagarde, President of the institution, stated that the banking sector in Europe is resilient and that the institution stands ready to provide liquidity when needed.

The European Central Bank raises interest rates in the fight against the inflation

The European Central Bank (ECB) has decided to raise interest rates further in the fight against inflation. On March 16, the institution announced a 50 basis point (bps) increase in its three benchmark interest rates, raising its main refinancing rate, marginal lending facility rate, and deposit facility rate to 3.50%, 3.75%, and 3.00%. each with effect from March 22.

Christine Lagarde, President of the ECB, cited inflation as the main cause of this rise, stating that “inflation is likely to remain too high for too long”. While the inflation figure has eased from 9.2% in December to 8.5% in February, the institution’s goal is to return to a steady 2%. The ECB forecasts to come close to that target in 2025 and expects inflation to fall to 2.2% by then.

The recent decline was mainly led by the downward trend in energy prices; However, food and beverage prices increased by 15% over the same period.

Banking system to be “resilient”.

The institution did not directly address recent developments that brought Credit Suisse, one of Switzerland’s largest banks, to the brink of collapse and eventually received a $54 billion bailout from the Swiss National Bank.

However, the ECB stated:

The euro area banking sector is resilient and has a strong capital and liquidity position. In any case, our monetary policy toolkit is fully equipped to provide liquidity support to the euro area financial system when needed and to ensure the smooth transmission of monetary policy.

The collapse of Credit Suisse comes after the recent closure and intervention of three US-based banks – Signature Bank, Silicon Valley Bank and Silvergate Bank – which investors from around the world fear could trigger a banking crisis on an international scale.

However, the ECB made it clear that it remains committed to its resolution on reducing inflation, stating that it will “stand ready to adjust all of our tools within our mandate to ensure inflation returns to our medium-term target”.

What do you think of the ECB’s recent rate hike? Tell us in the comment section below.

Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late in the game and entered the cryptosphere when the price surge took place in December 2017. He has a computer engineer background, lives in Venezuela and is socially affected by the cryptocurrency boom. He offers a different take on crypto’s success and how it’s helping those who are unbanked and underserved.

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