European policymakers, as expected, raised the deposit rate to 2.5 per cent, the highest since 2008 and the peak has yet to be reached.
| The European Central Bank lifted interest rates by a half-point, with president Christine Lagarde saying another such move is almost certain next month, despite conceding that the inflation outlook is improving.
Ms Lagarde said risks to the growth and inflation outlook have become more balanced, calling the economy more resilient than expected. A clearer picture will emerge in March, when new quarterly economic projections are available that account for the recent pullback in energy prices. Euro-area bonds extended gains on speculation that the pace of monetary tightening will slow. Money markets added to bets for a half-point increase in March though trimmed wagers on the peak of the tightening cycle to below 3.5 per cent.
It’s been a busy week for central banks. As well as Wednesday’s decision by the Fed to lift rates by a smaller, quarter-point increment,Even after a steeper-than-anticipated slowdown in January, euro-area inflation – at 8.5 per cent – remains more than four times the ECB’s 2 per cent target. What’s more, a measure of underlying price pressures is stuck at a record.
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