Market Updates
European Markets Plunged 3%, Central Banks Signaled More Pain Ahead
Bridgette Randall
15 Dec, 2022
Frankfurt
Benchmark indexes plunged after central banks in the region raised rates and lifted the inflation outlook.
The European Central Bank and the Bank of England lifted rates by 50 basis points as widely anticipated but their views on inflation and rate path put markets on edge.
Despite the four rate hikes, the ECB has more work ahead and inflation shows few signs of significantly declining.
The Bank of England also lifted its lending rate and revised higher its estimate of GDP contraction.
ECB Signals Additional Rate Hikes
The European Central Bank lifted its key lending rate and held out for more rate increases citing elevated inflationary pressures in the currency union.
The ECB lifted its deposit policy rate by 50 basis points to 2.0%, the refinancing rate to 2.5% and the marginal lending rate to 2.75%.
The widely expected fourth rate hike lifted the rate from nominal negative rates to 2.0% after inflation surged to a 4-decade high.
The central bank raised its lending rate by 75 basis points in October following rate hikes of 50 basis points in September and July and pushed the nominal rate in the positive territory for the first time since 2014.
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