The line of the hawks prevails despite the tensions on the markets. Frankfurt goes straight with monetary tightening to keep inflation under control and warns: "The banking sector in the euro area has good resilience"
The Governing Council of the European Central Bank (ECB) has decided to raise interest rates by 50 basis points in order to counter inflation in the Eurozone. Therefore, the deposit rate rises to 3 per cent, while the main and marginal lending rates rise to 3.5 and 3.75 per cent, respectively.
These were delicate days for the markets, with the European stock exchanges plummeting at the start of the week reflecting the collapse of the Silicon Valley Bank and still under stress today due to the collapse of Credit Suisse. Also for this reason some analysts expected an easing of the tightening, with an increase of 25 basis points instead of 50. In the end the hawks line prevailed.
"The Council is closely monitoring the ongoing market tensions and is ready to intervene where necessary to preserve price stability and financial stability in the euro area", reads the statement of the meeting that just ended. "The euro area banking sector is resilientwith strong capital and liquidity positions," Eurotower stressed. "In any case - it is recalled - the ECB has all the necessary tools to provide liquidity to support the financial system of the euro areaif the need arises, and to preserve the orderly transmission of monetary policy".