The European Central Bank (ECB) is expected to raise interest rates for the fourth consecutive time on Thursday, though it is likely to adopt a smaller hike than at the last two meetings and outline plans to drain cash from the financial system as it fights runaway inflation in the area EUR.
The ECB raised interest rates on bank deposits from -0.5% to 1.5% in just three months, thus reversing a decade of ultra-easy money after being blindsided by the sudden rise in prices.
But the pace of tightening is likely to slow at Thursday’s meeting as inflation shows signs of having peaked and a recession is in sight.
Analysts polled by Reuters expect the ECB to raise interest rates by 0.5 percentage point, following hikes of 0.75 points in the past two meetings, mirroring the change adopted by the Federal Reserve on Wednesday.
But the euro zone central bank, like the Fed, is likely to signal further adjustments to convince investors it is still serious about tackling inflation, which it now projects above its 2% target through 2025.
The ECB is also expected to outline plans to stop substituting bonds in its €5 trillion portfolio, which would reverse years of debt purchases that have made the central bank the largest creditor to many euro-zone governments.
The measure, which squeezes liquidity out of the financial system, seeks to allow the cost of long-term borrowing to rise and follows a similar measure taken by the Fed earlier this year.
The ECB will announce its monetary policy decisions at 10:15 (Brasilia time) this Thursday, followed by a press conference by President Christine Lagarde at 10:45 (Brasilia time).
Lagarde is expected to face questions about the extent to which the ECB intends to raise rates and reduce its bonds – and the interplay between the two.
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Source: Terra
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
