15 June 2023
If you are covering the news that the European Central Bank has raised rates to 3.5%, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The European Central Bank would dream of being in the position of the Federal Reserve last night in being able to pause the rate hikes to assess their impact. However, that is not the case and we have another rate rise on the continent, taking interest rates to 3.5%. It has noted that inflation is expected to say ‘too high for too long’, and as such it still has a way to go before it can consider hitting the pause button. With the Bank of England facing an equally difficult time with inflation and the effect of interest rates, we are beginning to see a divergence in monetary policy in developed markets and this will have an impact on markets.
“While it has previously been a case of central banks closely following what the Fed does in the US, they no longer have that luxury. It is a tricky task the ECB has too. Germany is in recession, and growth across the Eurozone is weak. Inflation has left an unsavoury mark on European industry and these rate rises will only help further dampen demand.”
