The European Central Bank stuck to its guns Thursday and raised all three of its main interest rates by 50 basis points, and the sixth straight hike was widely expected by economists despite rising concerns of possible systemic weakness in the financial sector.

Forget turgid growth, forget global fears of a banking meltdown – for the Eurozone rate-setters, it seems Job One this week was consumer price growth, especially because the ECB led its latest statement on monetary policy with the following sentence: “Inflation is projected to remain too high for too long.”

As TD Securities noted: “This does not sound like an ECB that wants to stop hiking rates yet.”

Capital Economics said Thursday’s move showed fortitude or questionable logic, depending on how one feels about risk. “The ECB’s decision to raise interest rates by 50bp today was the riskiest of the available options – we think investors would have understood if the bank decided to pause. (LiveSquawk - Continue Reading)

Fears that anything but a half-point hike would trigger panic among investors helped settle the European Central Bank’s interest-rate decision on Thursday, according to people familiar with the talks.

As officials met over the past two days, traders were scouring financial markets for signs that other lenders might suffer the same strains that had hammered Credit Suisse Group AG and Silicon Valley Bank. ECB Vice President Luis de Guindos already warned European finance ministers earlier in the week that banks could be vulnerable to rising borrowing costs.

While the ECB dropped language in their Thursday statement on the future path for rates, there remains a live discussion on the need for more increases to bring inflation under control once market turmoil subsides, said the people who declined to be identified because such deliberations are confidential. (Bloomberg - Continue Reading)

With the bulk of relevant economic data now in hand ahead of their policy meeting next week, U.S. central bankers are seen pressing on with their inflation-fighting campaign with a quarter-point interest-rate hike that just days ago looked possibly derailed by turmoil in the banking sector.

The move, which would bring the Fed's benchmark rate to a 4.75%-5% range, would follow the European Central Bank's decision on Thursday to stick with its own aggressive rate hike, as concern over high inflation outstripped fears of a global banking crisis.

After the ECB's 50-basis point hike, traders of U.S. rate futures firmed up their bets that the U.S. central bank will raise interest rates by 25 basis points next week, and slashing the probability of a pause to about one chance in five.

An unexpected drop in U.S. jobless claims, which pointed to continued labor market strength, and stronger-than-expected housing data on Thursday also boosted trader bets on a Fed rate hike, as they suggest inflationary pressures are far from quelled by the tightening campaign to date. (Reuters - Continue Reading)