ECB Delivers Unprecedented 75bps Hike to Dampen Record Inflation

ECB, EUR Price Analysis & News

• ECB Hikes All Key Rates by 75bps.
• Euro Largely Unmoved, Focus on Lagarde Presser.

OVERVIEW: The ECB has raised all three key interest rates by 75bps to weigh on record levels of inflation in the Euro Area. The move to hike interest rates by 75bps had largely been expected by economists and markets, hence the initial impact on the Euro has been tepid thus far. Elsewhere, the ECB stated that over the next several meetings the governing council expects to raise rates further, which is in line with money market pricing where markets see another 92bps of tightening by year-end.

Source: Refinitiv

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ECONOMIC PROJECTIONS

GDP Growth of 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024 (June: 2022 2.8%, 2023 2.1%, 2024 2.1%)

Inflation is now expected to average 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024

Looking ahead, the main focus will be on ECB President Lagarde’s press conference where talk of moving rates into restrictive territory (above neutral rates) would be needed in order to underpin the Euro in the short term. However, the bigger story is the energy crisis, which continues to pressure the Euro through parity.

EUR/USD Chart: 10-Minute Timeframe

Source: Refinitiv