FXNEWSTODAY – The euro rose against most major currencies during Thursday’s trade following the announcement of an interest rate hike.
On Thursday, June 15, the European Central Bank raised interest rates for the eighth consecutive time, signaling further policy tightening as it battles high inflation.
The ECB has increased borrowing costs by 4 percentage points a year, the fastest pace ever, but it is now clear that a peak is on the horizon, and the debate is slowly turning to how long rates should remain at current levels.
“Future decisions by the Governing Council will ensure that key ECB interest rates are raised to sufficiently contained levels to allow inflation to return to its 2% medium-term target in time,” the ECB said after raising the deposit rate by 25 basis points. A maximum of 3.5% in 22 years.
The ECB added: “Staff have revised down their forecasts for inflation excluding energy and food, particularly this year and next, due to earlier upward surprises and stronger labor market effects on the pace of deflation.”
Before Thursday’s close, markets had expected another 25bps ECB rate hike in July or September, and saw a moderate chance of another move later this year, perhaps in September or October.
The European Central Bank also decided on Thursday to end reinvestments in its 3.2 trillion euro asset purchase program from July 1.
In trade, it was up 0.2% at 1.0947 by 22:30 GMT.
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