Music rate it icon8/24/2023 The report also found that banks had tightened credit standards further across all loan categories. Recent evidence suggests the euro area may be stuck in recession, bolstering the case for a pause.ĭemand for business loans fell to a record low in the second quarter, according to a survey published by the ECB Tuesday. “This hints that today’s hike could be the last, but it is by no means certain,” Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note. The bank said this month that rates will be “set at,” rather than “brought to,” sufficiently restrictive levels. Several analysts pointed to a subtle change in the ECB’s language compared with June. “We have an open mind as to what the decisions will be in September and in subsequent meetings,” ECB President Christine Lagarde told journalists, adding “we might hike we might hold.” The ECB, meanwhile, is entertaining its first pause since it started hiking a year ago. Traders are convinced the Fed is done hiking, giving an 80% probability to no change at its next meeting, according to the CME FedWatch Tool. US and European policymakers remain concerned about consumer prices, although there is growing evidence that interest rate hikes are starting to tame inflation while also dampening economic activity. The ninth consecutive hike by the ECB followed another rate increase by the US Federal Reserve, which raised benchmark borrowing costs Wednesday - also by a quarter of a percentage point - to their highest level in 22 years. “Inflation continues to decline but is still expected to remain too high for too long,” the central bank said in a statement. Borrowing costs were previously jacked up this high only in October 2000. The ECB hiked the benchmark rate in the euro area to 3.75%, which matches the highest rate since the launch of the euro currency in 1999. The European Central Bank raised interest rates by a quarter of a percentage point Thursday but hinted it could pause at its next meeting, as data points to a deepening economic downturn in the 20 countries that use the euro.
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