PREVIOUS TRADING DAY EVENTS 27 July 2023

The European Central Banks decision was to increase rates by 25 basis points, as expected. It was the ninth consecutive rate increase as an effort to bring inflation down.

The ECB said Inflation continues to decline but is still expected to remain too high for too long. 

The Governing Council is determined to ensure that inflation returns to its 2 mediumterm target in a timely manner. It therefore today decided to raise the three key ECB interest rates by 25 basis points.

The developments since the last meeting support the expectation that inflation will drop further over the remainder of the year but will stay above target for an extended period. While some measures show signs of easing, underlying inflation remains high overall. The past rate increases continue to be transmitted forcefully financing conditions have tightened again and are increasingly dampening demand, which is an important factor in bringing inflation back to target.

However, recent activity surveys suggest the economic slowdown is now affecting both manufacturing and services within the Eurozone.

The Fed had raised its own rates the previous day by 25 basis points as well. While the market expects no more hikes from the Fed and ECB as inflation reaches close to the targets, the Bank of England is still expected to have a few more rate hikes. Inflation in the U.K. remains higher than in the Eurozone or the U.S.

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