ECB likely to stick to big rate hike despite banking turmoil, source says
European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, despite turmoil in the banking sector, as they expect inflation will remain too high in coming years, a source told Reuters.
Investors had begun to doubt the ECB’s commitment to another big rate hike this week after the collapse of Silicon Valley Bank (SVB) in the U.S. sent ripples through global financial markets.
But the source, who is close to the Governing Council, said the ECB was unlikely to ditch its plan to raise rates by 50 basis points on March 16 – announced at its last meeting and repeated several times by President Christine Lagarde and her colleagues – because that would damage its credibility.
Futures on German government bonds , , the euro zone’s benchmark, fell after the Reuters report and the euro rose against the British pound .
The source added that formal proposals for the meeting had not yet been distributed but policymakers had seen the new quarterly projections.
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