European Central Bank governors will meet Thursday, with fears over a widening banking crisis testing their resolve to raise interest rates again by a hefty half percentage point.
Investors say the ECB should reconsider its plans following the collapse of Silicon Valley Bank and Signature, the sector’s biggest failures since the 2008 financial crisis.
Fears of contagion have spread to Europe, with stock markets tumbling and Credit Suisse shares hitting a record low on Wednesday, while other lenders also saw dramatic drops.
“The sell-off may have implications for the ECB’s policy decision,” said Capital Economics analyst Andrew Kenningham.
The banking crisis poses a conundrum for central bankers seeking to tame inflation while preventing an exacerbation of the market turmoil.
SVB’s demise was precipitated by the US Federal Reserve’s own rate-hike campaign, which brought down the value of bonds with lower returns that the California bank held, causing it to lose $1.8 billion.
This report’s information was first seen on ZAWYA; to read more, click this link.
