ECB rate decision - Lagarde and SVB hold the key
The European Central Bank’s expected 50 bps rate hike doesn’t look as certain as before Silicon Valley Bank’s collapse. IG’s Angeline Ong takes a look at the factors that will determine the central bank’s actions on Thursday.
Rock and a hard place
The ECB is caught between a rock and a hard place, isn't it? On the one hand, that SVB collapse has sent shock waves through global financial markets, forcing many central banks all the way from Australia to the United States to change their interest rate 'dot plots'.
Inflation
On the other hand, inflation is still uncomfortably high. It hasn't come down as much as policymakers would have liked and this could be why money markets still see an 85% chance the ECB will hike rates by 50 basis points. Still, there are small signs that this 50 basis point to hike might be not be as certain as traders think. Some banks, including Deutsche Bank AG, expect a smaller or no increase at all. So where is the salad dressing? Well, President Christine Lagarde is known for seeking the broadest consensus possible. What could also really sway the decision on interest rates depends largely on whether or not there is any more SVB Financial Group spillover.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Explore the markets with our free course
Discover the range of markets you can spread bet on - and learn how they work - with IG Academy's online course.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
