02 February 2023
If you are covering the ECB’s decision to raise interest rates, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The European Central Bank has followed the Bank of England in delivering a 50bps rise in interest rates as it too continues to battle against inflation. However, where the ECB differs from other central banks is the fact it is much further behind in its hiking cycle and as such still has some way to go before it can think about pausing or pivoting. So much so it has already committed to a 50bps rise in rates at its next meeting in March, before it begins to reassess.
“European economies are holding up okay in the face of inflation and rising rates, but the spectre of recession remains ever present in today’s environment. Given there is a chance the ECB may still be raising rates while others can pause and take a breath is not an ideal scenario for the region. With conflict in Ukraine persisting, the recent fall in energy prices has not been enough to help bring down core inflation, and this is what the ECB will be watching closely as it tries to get back on to a path of normal monetary policy. It is more exposed to the ramifications of Russia’s invasion of Ukraine, and for as long as that continues to bring economic issues, Europe will suffer more heavily as a result.”
