Will economies digest the rate hike decided by the ECB?

ECB, line (too much?) Tough against inflation. The comment by Giorgio Broggi, Quantitative Analyst at Moneyfarm

As expected, the European Central Bank has opted for a rate hike of 75 basis points, driven by ever-growing inflationary fears and supported by an economy that seems sufficiently resilient for the moment.

Inflation in the Eurozone, in fact, continues to remain worrying (above expectations at 9.1% in August), especially after the Russian decision to cut gas supply, while the latest data on September GDP show a surprisingly aggregate annual growth positive at 4.1%.

All in all, although recession fears continue to increase, with the probability of recession in the next 12 months now at 50% (source: Bloomberg ), the ECB has strongly reiterated its will to fight inflation at all costs, to avoid major damage in the medium to long term.

The markets reacted moderately to the publication of the decisions, showing how much expectations were already substantially priced both by the risky asset markets and on the monetary and currency side. Even the spreads between central and peripheral countries did not show nervousness, signaling that the risk of "fragmentation" remains manageable for the moment.

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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/le-economie-digeriranno-il-rialzone-dei-tassi-deciso-dalla-bce/ on Thu, 08 Sep 2022 13:08:42 +0000.