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ECB lifts rates 25 bps while projecting higher next-year growth
After the announcement, EURUSD steadied near 1.1610, recouping part of early losses despite a tone viewed as signaling a possible pause.
The European Central Bank raised its key interest rate by 25 basis points, and the accompanying statement struck a fairly optimistic tone, according to analysis by Action Forex.
While the ECB pointed to mounting inflation pressures and uncertainty linked to the Middle East conflict, it also increased its GDP growth forecasts for next year, with inflation forecasts staying above the ECB’s target for the foreseeable future.
In currency markets, EURUSD had been down about 0.3% against the dollar early in European trading, but it found support near 1.1610 and recovered roughly half of those losses shortly after the rate decision.
Action Forex said the statement’s neutral tone and readiness to act in either direction are difficult to interpret as a bullish signal for the euro, adding that investors have been weighing rising bond yields in heavily indebted euro area countries and higher oil and gas prices as factors that could weaken the single currency and worsen expectations for the economy and the trade balance.