The European Central Bank sets the policy rate at three percent

EconomyMar 16 ’23 5:02 PMauthor: John Lucas

Despite the tensions in the financial markets, the European Central Bank, as expected, raised the interest rate by fifty basis points. With this, the ECB hopes to continue to fight inflation. The question was whether the ECB would tone down that fight a bit. The answer to that is no, they won’t.

With the new increase, the European policy rate is now three percent. “This was to be expected,” says Han de Jong, a home economist at BNR. Christine Lagarde, President of the European Central Bank, said in her press conference that the fight against inflation will only weaken if financial stability is threatened. This will not be the case now. “European banks are in a much better position than they were during the 2008 credit crisis and there are also tools to ensure financial stability,” stresses De Jong.

ECB President Lagarde (right) and Vice President De Guindos at a press conference. (ANP/dpa Picture-Alliance)

Nor did the drop in prices as a result of financial problems with Credit Suisse have any influence on the decision. “The problem with Credit Suisse is not high interest rates, but structural mismanagement, frustrated customers who pull out and the largest shareholder making a regrettable statement,” says de Jong.

Read also | The European Central Bank raises interest rates more by half a percentage point


De Jong believes that this does not change the fact that the huge rise in interest rates in recent months is a problem for the entire economy. “In the US, we’ve seen it have a disastrous effect on the Silicon Valley bank. That’s why the ECB is watching the situation so closely,” Lagarde said. “Of course it would be awful if the central bank did anything other than watch things closely.”

Read also | The ECB does not have to choose between stability and inflation

According to De Jong, Credit Suisse is strong enough to survive this crisis, in part due to the intervention of the Swiss Central Bank. It’s an important bank, somewhere between Rabobank and ING in size. I think they do it pretty well in their own right.

The European Central Bank also said today that few financial institutions will be affected by the crisis at Credit Suisse. The message here is basically: Don’t worry, we have this“.

See also  Belgium also imposes a flight tax - business trip

Leave a Reply

Your email address will not be published. Required fields are marked *