The ECB's interest rate hike after inflation caused a bigger impact than the problems of some world banks today.
The European Central Bank (ECB) has just announced an increase in key interest rates by 0.5%, bringing the main interest rate to 3% in the context that banks have experienced many shocks recently.
The ECB's interest rate hike is because inflation has a bigger impact than the problems of some world banks today.
At the same time, according to the latest information, the central banks of the 20 countries that use the euro also raised the deposit rate to 3% - the highest level since the end of 2008, as inflation is believed to exceed 2% target.
Last week, the banking sector was under pressure when the US government said that Silicon Valley Bank (SVB) was insolvent. This event caused the collapse of branches of SVB around the world, and raised concerns about whether central banks are aggressively raising interest rates.
However, the ECB President also said that the turmoil in the market in recent times is not similar to the global financial crisis of 2008.
European officials also confirmed: "The situation in Europe is different from that in the US, the concentration of deposits in the region is less, the flow of deposits seems to be more stable.
On the other hand, since the crisis after the crisis In the global financial markets, European banks are well-capitalised.
The ECB emphasized that the euro area's banking sector "has good resilience and high liquidity".
After the shares of euro area banks have been in free fall this week due to the impact of the SVB and Credit Suisse crash. On March 16, it was reported that the Swiss Central Bank had "injected" Credit Suisse with a bailout of $ 54 billion to enhance liquidity.
The move was large enough to send the bank's shares up about 20% and drag on other bank stocks.
ECB commits to support if needed
In fact, the ECB has also raised interest rates in 6 consecutive meetings since July 2022 (a total of 3.5 percentage points).
Besides, after many "fluctuations" in the world, some financial investors expected that the ECB would choose a smaller increase of 0.25 percentage points. They are also expecting the ECB to set a top rate of 3.25% compared with the 4.1% forecast last week.
The ECB has revised its inflation expectations. The agency forecasts average inflation this year and next year at 5.3% and 2.9%, respectively, lower than forecasts made in December 2022 (6.3% and 3.4% respectively. ). In December 2022, the central bank forecast inflation at 6.3% in 2023 and 3.4% in 2024.
The main concern of the ECB right now is that monetary policy may not work as expected if the world has a full-blown financial crisis. That leaves the ECB in a dilemma when it has to uphold the task of fighting inflation and maintain financial stability.
The ECB's representative also said: "The Governing Council is closely monitoring the current volatile situation and will take the necessary response to maintain price and financial market stability."