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European Central Bank raises rates by 50 basis points, promises another hike in March

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European Central Bank

Christine Lagarde, President of the European Central Bank speaks at an event.

Bloomberg | Bloomberg | Getty Images

The European Central Bank on Thursday confirmed expectations of an interest rate hike of 50 basis points, taking its key rate to 2.5%.

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In a statement, he pledged to “stay the course by raising interest rates significantly at a steady pace” and, in unusually strong language, said he intended to raise them by 50 additional basis points in March.

He said keeping rates at restrictive levels would help control price rises by dampening demand and keeping inflation expectations constrained. Decisions at future meetings will depend on the data, he added.

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The move follows four hikes in 2022 that took eurozone rates out of the negative territory for the first time since 2014.

ECB President: fiscal and monetary policies must work together

Eurozone inflation fell for the third consecutive month in January, according to flash figures released on Wednesday, but headline inflation remained high at 8.5%. Core inflation, which excludes energy and food, remained stable at 5.2%.

Attention now turns to Thursday’s speech and press conference by Lagarde, which begins at 2:45 p.m. Frankfurt time, for an indication of the central bank’s latest economic outlook and further details on its plans to raise and quantitative tightening.

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In December, it announced that from March it would begin to reduce its balance sheet by 5 trillion euros ($5.490 billion) by 15 billion euros per month on average until the end of June 2023.

On Thursday, it said that, in line with current practice, it would continue with partial reinvestments of its maturing debt.

“The remaining reinvestment amounts will be distributed in proportion to the share of redemptions in each constituent program of the APP (Asset Purchase Programme) and, within the framework of the public sector purchase program (PSPP), to the share of redemptions of each jurisdiction and across countries and supranational issuers,” its statement read.

This is breaking news. Please check for updates.

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