Interest rates latest publications
For the second time in a row, the ECB has struck with aggressive rate hikes, this time by 75 basis points. A magnitude more or less pre-announced in the last few days, when in July the expectation was increasing by 50.
The PBoC cut MLF, repo rate and LPR recently to stimulate growth, but it does not indicate China will start a massive easing cycle.
So far this year, the euro has depreciated by more than 10% against the dollar, weakening in mid-July to the level of parity between the two currencies for the first time since 2002.
The Fed will take the policy rate to its longer-run neutral level. Although the pathway to achieve a soft landing has evolved from “likely” to “plausible”, the tightening cycle still has legs.
The European Central Bank (ECB) has finally emerged from the extraordinary situation it has been in since 2014 with interest rates in negative territory, after raising all three benchmark rates by 50 basis points, thus leaving the refinancing rate (again the monetary policy benchmark) at 0.50%.
Inflation continues to rise on both sides of the Atlantic, albeit at a different pace, reaching around 9% year-on-year in June in both economies. However, economic activity and inflation are being affected by shocks waves that are hitting them unevenly.
July 21, 2022
Europe | ECB: New tool aids bold exit from negative rates as inflation risks intensify
Today decision, this combination of faster rate hikes and a new instrument is most welcome as it signals ECB’s decisive yet prudent approach to monetary policy making in a limiting and highly uncertain environment.
A specific tax on banks leads to an equilibrium with less credit and a higher cost, lower growth in activity and employment, and lower revenues than initially expected.