The European Central Bank raises its benchmark deposit rate by 50 basis points to 0%, its first rate increase in 11 years.
among them – with a new bond purchase scheme. Sources told Reuters they did not expect to use it imminently despite a sell-off in Italian bonds.
“We decided on balance that it was appropriate to take a larger step towards exiting from negative interest rates.” The ECB had for weeks guided markets to expect a 25-bps increase on Thursday, but sources close to the discussion told Reuters early this week that 50 bps had come into play as part of a deal includingWith inflation across the 19 countries that use the euro already approaching double-digit territory, it is at risk of getting entrenched well above the ECB’s 2% target. Anyover the coming winter is likely to push prices even higher, perpetuating rapid price growth.
The euro climbed to as high as $1.0278 after the rate hike before easing back to $1.0183, flat on the day. Markets are now pricing in a 50-bps rate hike in September and see a combined 127 bps of rises over the rest of the year.The new bond purchase scheme, called the Transmission Protection Instrument , is intended to stop any excessive rise in borrowing costs for governments across the currency bloc as policy tightens.
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