Beautiful Virgin Islands

Tuesday, Jun 03, 2025

European Central Bank increases interest rate by 0.5%

European Central Bank increases interest rate by 0.5%

The European Central Bank pushed ahead with a large interest rate increase on Thursday, brushing aside predictions it might dial back as markets reacted to the collapse of an American bank and liquidity fears at Switzerland’s second largest lender.
The ECB hiked rates by half a percentage point to 3.5%, underlining its determination to fight high inflation of 8.5 %.

While some foresaw a smaller increase because of the banking turmoil, President Christine Lagarde repeatedly called the banking sector in the 20 countries using the euro currency “resilient,” with strong financial reserves and plenty of ready cash.

And if it became necessary, she said, the ECB is “fully equipped” to provide additional support to the banking system.

“We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability,” Lagarde said.

ECB Vice President Luis de Guindos said the eurozone’s exposure to Credit Suisse, which is outside the European Union’s banking supervision structure, was “quite limited” and “not concentrated” in any one place.

Their message follows the collapse of Silicon Valley in the US after suffering losses on government-backed bonds that fell in value due to rising interest rates.

Then, globally connected Swiss bank Credit Suisse saw its shares plunge this week and had to turn to the Swiss central bank for an emergency bail out.

The troubles at Credit Suisse dragged down the shares of stalwart European lenders such as Deutsche Bank, BNP Paribas and Societe General on Wednesday. Bank shares recovered Thursday.

Analysts say the share selloff was fed by investor fear that banks took added risks to increase investment returns during years of very low interest rates and some may have failed to safeguard themselves against those holdings turning sour as rates rose.

As for more rate hikes in Europe, Lagarde said “inflation is projected to remain too high for too long” and that further increases will be based on what the numbers show. She did not commit either way, unlike her stance before Thursday’s meeting when she said a rate increase was “very likely”.

“Markets are assuming that this may be the ECB’s last rate hike, but the reality is that developments in the banking sector could shift either way in coming weeks,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. “If the panic eases, the ECB is likely to resume tightening before long” with more increases.

Similar questions are being raised about what the US Federal Reserve will do at its meeting next week.

Fed Chair Jerome Powell said only last week that the ultimate level for rates would be “higher than previously anticipated,” leading some analysts to predict the Fed would raise by half a point after slowing the pace to quarter-point in February. Since then expectations shifted back toward a quarter-point.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
German Chancellor Merz Keeps Putin Guessing on Missile Strategy
Mandelson Criticizes UK's 'Fetish' for Abandoning EU Regulations
British Fishing Boat Owner Fined €30,000 by French Authorities
Dutch government falls as far-right leader Wilders quits coalition
Harvard Urges US to Unfreeze Funds for Public Health Research
Businessman Mauled by Lion at Luxury Namibian Lodge
Researchers Consider New Destinations Beyond the U.S.
53-Year-Old Doctor Claims Biological Age of 23
Trump Struggles to Secure Trade Deals With China and Europe
Russia to Return 6,000 Corpses Under Ukraine Prisoner Swap Deal
Microsoft Lays Off Hundreds More Amid Restructuring
Harvey Weinstein’s Publicist Embraces Notoriety
Macron and Meloni Seek Unity Despite Tensions
Trump Administration Accused of Obstructing Deportation Cases
Newark Mayor Sues Over Arrest at Immigration Facility
Center-Left Candidate Projected to Win South Korean Presidency
Trump’s Tariffs Predicted to Stall Global Economic Growth
South Korea’s President-Elect Expected to Take Softer Line on Trump and North Korea
Trump’s China Strategy Remains a Geopolitical Puzzle
Ukraine Executes Long-Range Drone Strikes on Russian Airbases
Conservative Karol Nawrocki wins Poland’s presidential election
Study Identifies Potential Radicalization Risk Among Over One Million Muslims in Germany
Good news: Annalena Baerbock Elected President of the UN General Assembly
Apple Appeals EU Law Over User Data Sharing Requirements
South Africa: "First Black Bank" Collapses after Being Looted by Owners
Poland will now withdraw from the EU migration pact after pro-Trump nationalist wins Election
"That's Disgusting, Don’t Say It Again": The Trump Joke That Made the President Boil
Trump Cancels NASA Nominee Over Democratic Donations
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OnlyFans for Sale: From Lockdown Lifeline to Eight-Billion-Dollar Empire
Mayor’s Security Officer Implicated | Shocking New Details Emerge in NYC Kidnapping Case
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Taylor Swift Gains Ownership of Her First Six Albums
Bangkok Ranked World's Top City for Remote Work in 2025
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
×