- Prior decision
- Main refinancing rate 1.25% vs 1.25% expected
- Prior 0.75%
- Deposit facility rate 0.75% vs 0.50% expected
- Prior 0.00%
- Marginal lending facility 1.50%
- Prior 0.75%
- This frontloads the transition from accommodative policy towards levels that will ensure the timely return of 2% inflation target
- Expects to raise interest rates further to dampen demand
- Will regularly re-evaluate its policy path in light of incoming information and the evolving inflation outlook
- Inflation remains far too high and is likely to stay above target for an extended period
- ECB will continue applying flexibility in reinvesting redemptions coming due in PEPP portfolio
- Following the raising of the deposit facility rate to above zero, the two-tier system for the remuneration of excess reserves is no longer necessary
- Full statement
The ECB pretty much delivers on expectations here as they reaffirm that inflation will remain high and above target for an extended period of time. The statement also reaffirms their commitment to raise rates further to try and bring inflation under control, despite the fact that their window to tighten is surely and slowly closing in.
The 75 bps fits with what markets have priced in, so I don't see much in the decision and statement to get markets too excited about anything. As mentioned earlier here, the euro is likely to continue to struggle on the balance of things. EUR/USD spiked a little on the decision to 1.0029 but is now down to 0.9997 on the day. Over to Lagarde now..