WAYS TO GO: ECB'S HIGHEST RATE IN 13 YEARS

To all Traders, kindly be informed that, The European Central Bank raised its key rate by 50 basis points to 2.5%. This is the highest rate since January 2009. The central bank warns that aggressive rate hikes are far from over. Like the US Federal Reserve, the ECB expects to bring inflation to the level of 2%. Experts expect to see the final rate in the region of 3.5%.

The decision comes despite yesterdays official figures that showed UK inflation had eased from a 41-year high of 11.1% to stand at 10.7% in the year to November 2022. Even though the rate hikes have slowed down, compared to previous moves of 75 basis points, President Christine Lagarde insists that investors should not read too much into that. Shorter moves are still acceptable, she said,even while acknowledging that a “shallow” economic slump is likely to have arrived.

The forecasts for inflation have also been revised, the target value of 2% is expected only by 2025. In particular, the scenario of a “relatively short” recession is being considered.