The European Central Bank, as expected, announced that they would be raising the three key ECB interest rates by 75 basis points…
The Governing Council decided to raise the three key ECB interest rates by 75 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00%, 2.25% and 1.50% respectively, with effect from 2 November 2022.
The ECB also announced no changes to their asset purchase program and the pandemic emergency purchase program…
The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it started raising the key ECB interest rates and, in any case, for as long as necessary to maintain ample liquidity conditions and an appropriate monetary policy stance…As concerns the PEPP, the Governing Council intends to reinvest the principal payments from maturing securities purchased under the programme until at least the end of 2024
Inflation continues to be an even bigger problem in Europe than in the US. “Inflation remains far too high and will stay above the target for an extended period. In September, euro area inflation reached 9.9%.” the ECB said in their press release. Making matters worse is that this inflation is happening against the backdrop of a shrinking economy which President of the ECB, Christine Lagarde, addressed in a press conference, “Economic activity in the euro area is likely to have slowed significantly in the third quarter,” which Lagarde believes means the higher “likelihood of a recession.”