ECB Raises Interest Rates Amid Inflation Concerns
Summary: Unlike the U.S Fed, the European Central Bank (ECB) hiked its benchmark interest rate by 25 basis points to 4.00%, 4.25%, and 3.50%. In two years, the ECB Governing Council expects inflation to decline. Crypto prices still trading in red and the overall momentum is deeply bearish.
The European Central Bank (ECB) stated on Thursday that it will be raising its benchmark interest rate by 25 basis points, one of three primary rates it controls. Interest rates on the bank’s principal refinancing operations, marginal lending facility, and deposit facility have been hiked to 4.00%, 4.25%, and 3.50%, respectively, as a result of a decision taken by the Governing Council.
These rates will be in effect as of June 21st, 2023. This follows a drop in the price of cryptocurrencies after the Federal Reserve hinted that interest rates would go up later in 2023. In contrast to the ECB, the Fed has opted to temporarily halt interest rate hikes.
The European Central Bank (ECB) increased interest rates due to fears of persistently rising inflation. After dropping 4.19 percent in the previous 24 hours in reaction to the European Central Bank’s rate hike, the price of bitcoin climbed on Thursday, only to turn red again.
When the European Central Bank did something similar at its meeting in May of 2023, the cryptocurrency market responded favorably. The Governing Council of the European Central Bank forecasts that inflation will fall during the next two years.
The ECB Council issued the following statement:
“According to the June macroeconomic projections, Eurosystem staff expect headline inflation to average 5.4% in 2023, 3.0% in 2024 and 2.2% in 2025. Indicators of underlying price pressures remain strong, although some show tentative signs of softening.”
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The European Central Bank (ECB) has pledged to take a suitably restrictive stance going forward to achieve its medium-term target of lowering inflation to 2%.