ECB surprises markets with a 50bp rate hike
Central bank unveils new instrument to prevent sharp increases in sovereign bond spreads
The European Central Bank announced its first interest rate increase since 2011 at its policy meeting today (July 21), by a greater margin than markets had expected. The ECB’s governing council decided to increase the key deposit rate by 50 basis points, to 0%, above the 25bp increase it seemed to forecast in June.
The ECB also dropped forward guidance and unveiled a new tool aimed at reducing the “fragmentation risks” caused by diverging yields on eurozone country’s sovereign bonds.
The
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