Yahoo Finance Live anchors Julie Hyman and Brad Smith discuss the European Central Bank’s decision to raise interest rates by 50 basis points.
JULIE HYMAN: And obviously this is a debate that not only the Federal Reserve is having but the ECB is having between inflation and financial stability, and guess what? The ECB has made its decision this morning, and it's going with inflation fighting.
As expected, the European Central Bank raised interest rates by 50 basis points and made a lot of comments that lead you to believe that it is targeting inflation here. The central bank saying in a statement that it is focused on inflation here. Inflation is projected to remain too high for too long, the ECB says. It says it's ready to respond on price stability and financial stability. And at the same time, the central bank is refraining from signaling future interest-rate moves in its statement.
This 50-basis-point move by the ECB was widely, widely telegraphed. And so there was still-- unlike here in the US, there wasn't a lot of expectation necessarily that the ECB would move on that. It also was given some cover, of course, by the Swiss National Bank which came in to offer a lifeline to Credit Suisse.
But still, Brad, really interesting here that you've got these two central banks with very similar issues, and the ECB is going-- continuing on its inflation-fighting path.
BRAD SMITH: Yeah, zeroing more on the statement from the ECB, the staff now sees inflation averaging 5.3% in 2023, 2.9% in 2024, and then 2.1% in 2025. At the same time, they're also still iterating here that the underlying price pressures remain strong. Inflation, excluding here energy and food, they continued to increase in February, and the staff expects that to average 4.6% in 2023.
That is higher than foreseen in December projections there. So they're continuing to monitor some of the upward pressures from past supply shocks and the reopening of the economy fade out as tighter monetary policy increasingly dampens demand. That via the statement from the ECB this morning.
JULIE HYMAN: Yeah, and also a reminder inflation broadly in the eurozone remains higher than it does here in the United States.