ECB STATEMENT: Hikes 75bps, says future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach

RATES: 

• Says today's decision frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target.


• Following the raising of the deposit facility rate to above zero, the two-tier system for the remuneration of excess reserves is no longer necessary.


• The Governing Council therefore decided today to suspend the two-tier system by setting the multiplier to zero.

GUIDANCE:

• Governing Council expects to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.


• Governing Council will regularly re-evaluate its policy path in light of incoming information and the evolving inflation outlook

ASSET PURCHASES:

• Governing Council will therefore continue applying flexibility in reinvesting redemptions coming due in the pandemic emergency purchase programme portfolio, with a view to countering risks to the transmission mechanism related to the pandemic.

ECB Euro Area Real GDP Forecasts (Sep 2022):

• 2022: 3.1% (prev. 2.8%)


• 2023: 0.9% (prev. 2.1%)


• 2024: 1.3% (prev. 2.1%)

ECB Euro Area HICP Forecasts (Sep 2022):

• 2022: 8.1% (prev. 6.8%)


• 2023: 5.5% (prev. 3.5%)


• 2024: 2.3% (prev. 2.1%)

Full ECB statement can be accessed here. 

Reaction details (13:29)

• There has been a choppy, yet unsustained, market reaction across macro asset classes as traders' digest the nuances of the release. 


• Ultimately, however, money market pricing of the cumulative trajectory is little changed, and still expects the central bank to hike rates again by 50bps in both October and December.

08 Sep 2022 - 13:15- Fixed IncomeData- Source: ECB