The European Central Bank on Thursday delivered an expected half percentage point interest rate hike and said it intends to raise by another half point in March as it attempts to wrestle down inflation. “The Governing Council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2% medium-term target,” the ECB said, in a statement. 

The ECB said keeping interest rates at restrictive levels “will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations.” Future policy decisions “will continue to be data-dependent and follow a meeting-by-meeting approach,” the ECB said. ECB President Christine Lagarde will hold a news conference at 2:45 p.m. Frankfurt time, or 8:45 a.m. ET. The ECB surprised market participants in December, with policy makers warning that they should prepare for a series of rate hikes to come. Since then, the eurozone’s economic backdrop has brightened, with mild winter weather leading to a fall in energy prices and averting a severe crunch that had been feared as a result of Russia’s invasion of Ukraine. But the improved economic picture is a double-edge sword for the ECB, noted analysts at Danske Bank. While headline inflation has eased, underlying measures remain sticky. Unlike the U.S., core inflation, which strips out volatile food and energy prices, continued to rise in the eurozone, with the December rate climbing 5.2% from 5% in November. Earlier Thursday, the Bank of England also delivered a half-point rate hike. The U.S. Federal Reserve on Wednesday raised the fed-funds rate by a quarter of a percentage point, as expected, marking a downshift after a series of outsize increases last year as it led major central banks in an aggressive hiking cycle. See: ‘Decidedly less hawkish’: 4 takeaways from Powell’s press conference as Fed hikes rates again The euro EURUSD, -0.02% was down 0.1% at $1.0938 versus the U.S. dollar,but is up around 1.1% in the new year. The euro and other major currencies fell sharply versus the U.S. dollar last year. The shared currency has rebounded in 2023 and the dollar has fallen back versus major rivals as traders bet the Fed is nearing the end of the hiking cycle and may deliver rate cuts by year-end in defiance of the central bank’s forecasts. European government bonds rose. The yield on the 10-year German government bond TMBMKDE-10Y, 2.144%, or bund, was down 14 basis points at 2.143%. European equities were higher, with the Stoxx Europe 600 SXXP, +0.92% up 0.5%. Source : [ECB delivers half-point rate hike and plans another in March](www.marketwatch.com/story/ecb-delivers-half-point-rate-hike-and-plans-another-in-march-11675344568?mod=newsviewer_click) undefined - Market / February 02, 2023