FRANKFURT, March 16 ― European Central Bank (ECB) policymakers are meeting today amidst turmoil in financial markets that could force it to divert from plans for another hefty...
FRANKFURT, March 16 ― European Central Bank policymakers are meeting today amidst turmoil in financial markets that could force it to divert from plans for another hefty interest rate hike even though inflation remains too high.
Now the ECB must reconcile its inflation-fighting credibility with the need to maintain financial stability in the face of overwhelmingly imported turmoil. Euro zone inflation was 8.5 per cent in February, below its peaks of last autumn but way above the ECB's 2 per cent target, and the outlook is likely to remain grim.
This outlook is so worrying that prior to the turmoil in the banking sector, which could derail the ECB's strategy and the whole economy, a long list of policymakers had advocated rate hikes continuing beyond March.Markets are nevertheless doubting the ECB's resolve and have dialled back bets on the size of Thursday's move and subsequent rate hikes.
Hoping to prop up confidence, the Swiss National Bank said late yesterday that it was ready to provide Credit Suisse with liquidity, if necessary, though the bank met all capital and liquidity requirements. ECB President Christine Lagarde will almost certainly try to reassure investors on the health of the bloc's banks, arguing that they are better capitalised, more profitable and more liquid than during previous periods of turmoil.
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