The European Central Bank (ECB) has recently raised interest rates to unusual heights. This has caused the euro to plummet to its lowest point in six months. Fortunately, however, this also may be the last hike of the ECB before they finally loosen things up in the future. ECB officials stated that they wanted to raise it as high as 4.0% for the time being.
Currently, euro notes are at a value of around $1.06 to the dollar. Stock indices did not do too badly out of the move, fortunately. The Stoxx Europe 600 index was up 1.5%, with the French CAC being 1.2% higher over Thursday. Meanwhile, the German Dax managed to rise up 1.0%.
The ECB have made statements regarding their decisions. They believe that these measures are necessary to ensure that they manage to keep inflation under control. With time, everything should be able to go back to normal.
A Positive Sentiment for Euro Rate
Some analysts thus believe that this indicates that the ECB is not planning to make further moves of this kind. This is likely to be the final step of this tightening policy to try and control inflation and, thereby, the euro exchange rate. Fortunately, then, the markets have taken this possibility into account. This explains the positive performance of the indices over the trading day. However, they do need to take into account negative data regarding the eurozone.
Investors have been anticipating an economic recession of sorts for a while now. The European Commission has tempered expectations as well, lowering growth forecasts by 0.8%.
The ECB has been making multiple moves to try to keep inflation in check recently. They have been raising borrowing costs continually since July 2022. Nonetheless, prices have risen 5.3% over the last year. We will see if the latest measures do the job of buoying the euro rate.
