In line with its strong commitment to its price stability mandate, the Governing Council of the ECB has taken further key measures to ensure that inflation returns to its 2% target over the medium term. So he decided to raise the ECB’s three key interest rates by 50 basis points and approved the so-called anti-spread shieldnoto come TPI (Transmission Protection Instrument).
A historic date today for the European Central Bank which, for the first time since 2011, raised interest rates and did it with a bang as ING analysts say. The 50bp rate hike and softening forward guidance show that the ECB believes the window for a series of rate hikes is closing quickly.
But let’s go into the details. What did the ECB just announce? First, all three main interest rates have been raised by 50 basis points, so that bank deposit rates will rise from -0.50% to 0, main refinancing rates from 0 to 0.50% and marginal lending rates from 0.25% to 0.75%.
In addition, a tool technically known as TPI (Transmission Protection Instrument) was introduced.
“This decision shows that the hawks must have been afraid, fearing that the rate hike promised in September of more than 25bps would be swept away by the looming recession. The agreement on the ICC had to be paid by the doves with a more decisive rate hike ”they say from ING. The “Transmission Protection Instrument (TPI)” will ensure that “the monetary policy stance is transmitted in an orderly manner in all euro area countries” and “is a prerequisite so that the ECB can fulfill its mandate to maintain price stability ”. For details, please refer to a forthcoming press release.