ECB struggled to agree on December rate hikes, minutes show

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European Central Bank officials struggled to agree on a 50 basis point hike in interest rates in December, but concluded that strong indications of future hikes were just as good as a bigger hike immediately, minutes from the central bank meeting showed. ECB this Thursday (19).

The ECB slowed the pace of its rate hikes on Dec. 15 but stressed that significant tightening was still to come and laid out plans to drain money from the financial system as part of a dogged fight against high inflation.

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The bank raised its rates by 50 basis points at that meeting, and President Christine Lagarde suggested as many as three more hikes of the same size.

“This was in some ways seen as broadly equivalent to raising rates by 75 basis points at the current meeting, because a less anticipated but more steady approach to bringing rates to restrictive levels could be seen as consistent with the nature of persistent part of the inflation process and continued high uncertainty,” the ECB said.

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This confirmed what was reported by Reuters on 15 December.

Still, a large number of officials were initially advocating a 75 basis point increase, and some resisted to the bitter end.

Sources told Reuters the stalemate ended when Lagarde offered to signal more 50 basis point increases and a tough message on inflation during her press conference, convincing enough officials to back the proposal.

Investors priced in more ECB rate hikes following the bank’s decision, but have revised their expectations since the turn of the year as inflation data came in lower than expected and the Federal Reserve raised the prospect of lower rate hikes.

Source: CNN Brasil

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