Market Updates
ECB's Plan to Lift Rates Lags Soaring Inflation
Brian Turner
09 Jun, 2022
New York City
The European Central Bank's monetary policy committee lowered its economic growth assessment, lifted inflation outlook and struck a cautionary note on economic conditions.
The European Central Bank said it plans to lift rates at its next meeting on July 1 and lower economic growth outlook.
After the meeting of the Governing Council, the central bank said it plans to lift rates by 25 basis points at its next meeting in July and expects additional hikes at the September meeting.
The central bank had previously guided that any rate increases will be announced only after the end of the net asset purchase program on July 1.
The euro declined after the ECB announcement but managed to rebound 0.5% by mid-day trading.
For now the main lending rate from the ECB was held at 0.00%, marginal lending rate at 0.25%, and bank deposits with the central bank earned -0.5%.
Annual consumer price inflation jumped to a 4-decade high of 8.1% in May, and rate hikes of 15 basis points are likely to have no or minimal impact on inflationary pressures.
The ECB revised higher its 2022 inflation estimate to 6.8% from the previous estimate 5.1% and lowered economic growth estimate to 2.8% from the 3.7% estimate in March.
The central bank also lowered 2023 and 2024 growth estimates and said inflation pressures are likely to subside in the next two years but are expected to remain above its 2% target rate in 2023.
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