As expected, the European Central Bank continued to raise interest rates at its May meeting.
On Thursday, the ECB Council decided to raise all three key interest rates by 0.25 percentage points. The decision was largely in line with the market’s expectations, although some predicted a 0.50 percent increase.
The interest rate for basic financing operations, i.e. the guiding interest rate, rose to 3.75 percent, the interest rate on the overdraft facility to 4.00 percent, and the deposit interest rate to 3.25 percent.
According to the ECB, its future decisions will ensure that interest rates are sufficient to curb inflation. The medium-term inflation target is still two percent.
“We have more work to do and we are not taking a break. It is extremely clear,” the ECB President Christine Lagarde said at a press conference after the interest rate decision.
“The message hasn’t changed much since March. The ECB will raise interest rates again,” said Saltmarsh Economicsin economists Marchel Alexandrovich news agency Reuters.
Yesterday, the US central bank Fed signaled in connection with its interest rate hike that tightening is probably over for now.
After the ECB’s decision, interest rates on government bonds in the euro area and the exchange rate of the common currency, the euro, turned downhill.
The interest rate on the more interest-sensitive German two-year government bond was down 11 percentage points at 2.506 percent, the lowest in a month. Before the interest rate decision, the interest rate was 2.683 percent.
The 2-year interest rates in France and Spain were also down by 12 percentage points.
The interest rate on the German 10-year government bond fell by four percentage points to 2.203 percent. Before the interest rate decision, it was at 2.283 percent.
The 10-year interest rate on the US government bond was down 0.6 basis points at 3.332 percent.
The two-year interest rate was down one percentage point at 3.796 percent.
At the time of review, one euro was worth 1.1025 dollars, 147.65 yen, 0.87633 pounds or 11.315 Swedish kronor. The dollar was 133.89 yen and the pound was 1.2584 dollars.
Source: Arvopaperi by www.arvopaperi.fi.
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