April 17, 2024

After Keeping Interest Rates Low, European Central Bank Expects Elevation Of Inflation 

Eurozone interest rates have tendencies of remaining at 0%, considering Lagarde is of the opinion that inflation may most likely not have an impact on the region as bad as it did the United States. 

In the process of the Federal Reserve threatening hikes on interest rates in spite of rising inflation, the European Central Bank (ECB) has tried out a varying approach. Christine Lagarde, the Bank President, said they do not plan on rushing into action stating that inflation is just a short-term challenge. 

Interest Rates Stay Unchanged 

The ECB’s refinancing rates will stay at 0%, CNBC reported. Although the marginal lending rate remains at 0.25%, -0.5% is where the deposit facility rate will remain. This decision would most likely come off as a surprise considering increased inflation in the region, taking after that of the United States. 

The inflation of the Eurozones’ YOY came at 5.1% as of January, although smaller economies were expecting inflation of 4.4% for the month. 

In the early hours of the day, Lagarde said that the inflation should be staying around for longer than anticipated, but it will most likely cool off closer to the year’s end. She had made comments like this about two months back, explaining that inflation is a boost that tends to drop in the direction of the target rate at the bank throughout 2022. 

Additionally, she stated that risks on inflation are pushed to the upside in coming terms as opposed to what the bank had anticipated in December. If the economy goes back to total capacity, she says inflation might move even hotter. 

The president had made a comparison between European inflation and the US, saying that the supply side basically drives it instead of being demand-driven. She concluded that they are not likely to witness a similar inflation increase that the US market had experienced. 

Meaning Of Bank Policy To Crypto 

For the past two months, the Fed has claimed over and over that it was going to be raising interest rates from March 7 to fight inflation which hit a 40 year high at about 7% during December. 

These comments have a likelihood of disturbing the stock market and cryptocurrency industry alike. Bitcoin is fast becoming known as a hedge against inflation for investors considering its definite fixed supply comprising 21 million coins. 

Due to this information, higher inflation has tremendously pumped its price, whereas concerns over more elevated interest rates have done the exact opposite. 

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