The European Central Bank Prioritizes Fighting Inflation by Raising Interest Rates
Priority #1 is still fighting inflation.
Despite all the chaos in the banking sector this week, the European Central Bank (ECB) raised interest rates by 0.50 percentage points yesterday.
But rising rates (+ poor risk management) is what nearly created a financial catastrophe in the first place.
It’s already painful, so why would central banks continue hiking rates?
ECB President Christine Lagarde said inflation has remained “too high for too long” and is “determined to return inflation back to 2%.”
But here’s why the Fed might not back down…
Per Bloomberg, “the risk of contagion has been dealt with, and the knock-on effects on the broader economy will likely be minimal” — suggesting the Fed needs to continue to boost rates.
Recent inflation and jobs data also hasn’t given the Fed any reason to stop.
Market expectations: Nearly 82% probability that the Fed will raise rates by 0.25 percentage points next week.