ECB Rates Interest Rate by 0.5% in Contrast to Fed’s 0.25% Hike

• This was done because of expectations that inflation would remain high.
• The ECB has signaled raising interest rates by another half percentage point in March.

The European Central Bank (ECB) has raised its benchmark interest rate by 0.5% points and said it would do the same in March, in contrast to the Federal Reserve’s 0.25% hike. This was done because of expectations that inflation would remain high in light of continued brisk economic expansion in the Eurozone and a swift reopening of China’s economy.

In order to counteract an unexpected spell of high inflation in the Eurozone, the ECB has started boosting interest rates at a record pace. The aftermath of the Covid-19 outbreak and the energy crisis caused by Russia’s invasion of Ukraine have both contributed to this. 

Similar Hike Projected For Next Month

The world’s primary monetary authority said in a statement that it will stick with its strategy to gradually increase interest rates. The European Central Bank (ECB) has signaled that it intends to raise interest rates by another half percentage point in March, following which it will evaluate its future monetary policy.

Indications like these point to a more forceful interest rate hike by the European Central Bank (ECB) in the coming months than by the Federal Reserve or the Bank of England. It’s likely that the decisions it makes may have far-reaching consequences in the financial markets, pushing up the value of the euro and affecting the cost of bonds issued in the Eurozone.

The crypto market since the start of the year has been pretty steady with Bitcoin still holding above the $23k level. Moreover, on Thursday, the Bank of England revised its economic outlook, saying that it now expects the next recession to be shorter and less severe than the one it forecast in November 2022.