Lagarde goes ahead with the monetary tightening – Corriere.it

The European Central Bank has announced an interest rate hike of 0.5%, bringing the rate on refinancing principal at 3.50%, that on deposits at 3%, and that on marginal loans at 3.75%. The note released by the institute also states that the Governing Council is closely following the tensions underway on the markets and is ready to intervene where necessary to preserve price stability and financial stability in the euro area.

GDP and inflation estimates

Future estimates for inflation in the Eurosystem still forecast growth at a rate of 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025. As regards core inflation, expectations are for an increase of 4.6% this year, 2.5% next and 2.2% in 2025. In December, ECB experts had forecast inflation to rise by 8.4% in 2022, to 6.3% in 2023, 3.4% in 2024 and 2.3% in 2025. As regards the core component, December projections were for a rate of 3.9% in 2022, to 4.2% in 2023, to 2.8% in 2024 and to 2.4% in 2025. As regards GDP, on the other hand, in the Eurozone an increase of 1% is expected in 2023 and 1.6% in 2024 and 2025 supported by the strength of the labor market, the improvement of the climate of confidence and the recovery of real incomes – reads the press release -. At the same time, the strengthening of growth in 2024 and 2025 is lower than in the December projections, reflecting the more restrictive monetary policy. Last December, ECB experts had forecast growth of 0.5% in 2023, 1.9% in 2024 and 1.8% in 2025.

Vulnerable banks

The vice president of the ECB, Luis de Guindos, has warned the finance ministers of the European Union, meeting in Brussels for the Council of Economy and Finance (Ecofin), that some banks in the Eurozone could be vulnerable to the rise in interest rates . This was reported by Bloomberg, underlining that de Guindos met with the finance ministers after the bankruptcy of Svb but before the turmoil at Credit Suisse. Guindos, speaking of the conditions of European banks after the collapse of Silicon Valley Bank, would have said that our institutions are much less exposed than their American counterparts but he also warned not to be complacent and warned that a lack of confidence could trigger contagion .

The response of the markets

After the news, most of the European stocks fell towards the negative sign. These also include Piazza Affari, where the Ftse Mib drops 0.3% to 25,489.84 points. The spread between Btp and German Bund rises to 196 points with a yield down by 4.091%. With the rate hike of 50 basis points, the euro loses share against the dollar, not defying from its guidance despite the financial turmoil. The single currency briefly climbed above 1.06 on the greenback before slipping to 1.056, down 0.1%.