the European Central Bank (ECB) faces a difficult decision at its council meeting this Thursday. The central bank will announce this at 2:15 p.m., followed half an hour later by a press conference with ECB boss Christine Lagarde, which you can follow in this live blog.
The Handelsblatt summarizes in advance which ones three key points it matters
1. How much is the ECB raising interest rates?
For a long time, an increase of 0.5 percentage points was considered likely. The markets are now expecting a rate hike of 0.75 percentage points to 1.25 percent for the base rate and 0.75 percent for the interest rate that banks receive for their deposits at the ECB, which is currently even more important. This would be the largest hike in the history of the central bank.
2. To what extent is the ECB changing its forecasts?
In addition to the interest rate decision, the ECB is also presenting new forecasts for growth and inflation in the euro area. Above all, it will probably revise the growth expectations for next year significantly downwards. Recently, several economists had warned of a recession.
3. Is the ECB adjusting the remuneration paid to banks’ reserves?
Another issue is likely to be whether the ECB will limit banks’ profits from long-term refinancing operations (TLTRO). The central bank launched these transactions during the corona pandemic. They enable the institutes to borrow money at extremely favorable conditions under certain conditions. After the interest rate hikes by the ECB, the banks can thus achieve even higher profits.