ECB set to raise interest rates by 50 basis points in February and March

The European Central Bank is expected to hike interest rates by 50 basis points in February and March. The ECB is also expected to continue raising rates in the following months, according to Klass Knot, a governing council member at the ECB.

ECB plans to hike rates by 50 basis points

While speaking in an interview with WNL, a Dutch broadcaster, Knot noted that even after the rates are raised by 0.5% in February and March, the ECB would not be done by then, and more mitigation strategies would be taken in May and June.

While speaking in another interview with La Stampa, an Italian newspaper, Knot noted that it was still early to determine whether the ECB would continue lowering the rate of interest rate hikes. However, he added that this would only be a possibility in the future when the risk surrounding inflation becomes more balanced.

While the ECB will, at some point, ease interest rate hikes and possibly move from a 50 basis point hike to 25 basis points, Knot noted that the institution was still far away from this.

ECB plans to raise deposit rates by 3.25%

According to a Reuters report, policymakers are yet to convince the market about their commitment to remain hawkish and take the rising inflation. The central bank said it would stop the hikes after the deposit hits 3.25% during the next quarter.

The report comes despite the recent sentiments by the ECB President, Christine Lagarde. Lagarde informed investors in Davos that they needed to revise their positions. Lagarde’s sentiments follow earlier comments made by policymakers in the Netherlands and Latvia about

The ECB’s interest rate hikes have been the highest on record. However, the aggressive stance taken by the ECB has failed to lower inflation to the targets set by the eurozone central bank of 2%. In December, the consumer price index increased by 9.2% compared to the previous year.

Lagarde and the Governing Council of the ECB are planning to raise the deposit rate to 2.50% on February 2. According to most economists, the March deposit rate hike will be followed by another 50% basis point in March.

During the next quarter, there are expectations that the central bank will hike rates again by 25 basis points before pausing. This will bring the terminal rate of the hikes during the current cycle to 3.25%. It will be the highest interest rate hike since late 2008. A poll conducted in December showed that the rate was at 2.50% at the end of March before jumping again to top 2.75%.