July 27, 2023
Effective July 27, 2023, the Governing Council made the decision to raise the three key interest rates set by the European Central Bank (ECB) by yet another 25 basis points. As a result, effective August 2, 2023, the interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility will all be raised to 4.25%, 4.50%, and 3.75%, respectively.
The increase in the rate follows the updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission by the Governing Council. The ECB highlighted, “Developments since the last meeting support the expectation that inflation will stay above target for an extended period but is expected to fall further over the remainder of the year. The Governing Council’s past rate increases are being transmitted forcefully and are gradually impacting demand and financing conditions across the economy.”
In tackling underlying inflation which remains high, The Governing Council is resolute in their data-based approach and will continue to adjust interest rates in accordance with new economic and financial data. Additionally, The Governing Council has set the remuneration of minimum reserves at 0% with the aim of maintaining yet improving the current monetary policy stance throughout the economy.
In conclusion, The Governing Council on behalf of European Central Bank stands ready to adjust interest rates for however long is necessary at sufficiently restrictive levels to ensure that inflation returns to its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
Disclaimer:
Analyst Certification – The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer(s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst in this research report.
Company Disclosure – The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.