News higher interest rates foreshadowed implicitly, but clearly President of the European Central Bank Christine Lagarde.

In answering a related question about the next steps on the interest rate front, he avoided specifying exactly how much interest rates would increase and at what “rate” the increase would be made.

However, he said that “we still have a long way to go,” given that any decisions will be made taking into account both the inflation forecast and its dynamics.

Thus, given that inflation, although declining, will remain high for a long time, she justified today’s decision increase in interest rate by 0.5%.

This decision was taken by an overwhelming majority of the Governing Council of the ECB following a recommendation from the Executive Council.

As shown Christine Lagardeonly two or three representatives of the Central Bank expressed a different opinion.

He even defended the decision despite the new data generated by the recent financial turmoil, emphasizing that there is no dilemma between financial stability and price stability.

He also assured that European banks have sufficient liquidity and a strong capital base. They are in much better shape than when the financial crisis hit after the crash. Lehman Brothers.

He even argued that there were significant differences between European banks and the bankrupt American SVB. He stressed that the ECB has effective tools in case European banks need to increase their liquidity.

As the ECB says, after all, in a statement: “The Governing Council is closely monitoring the current market turmoil and stands ready to respond, if necessary, to maintain price stability and financial stability in the euro area.

The Eurozone banking sector is resilient, capital strong and liquid.

In any case, the ECB’s toolbox is fully equipped to provide liquidity to the eurozone’s financial system, if needed, and to ensure a smooth transition of monetary policy.”

However, the head of the ECB acknowledged that high interest rates have begun to have a negative impact on both the financial sector and the growth front, which is already reflected in the bank’s ongoing revision of its two-year growth forecasts. 2024-25.

As she mentioned, the rise in interest rates in the markets has changed dramatically in recent days after the big turmoil in the financial markets.

He acknowledged that loans to enterprises in the euro area have become more expensive. The credit expansion of enterprises has further decreased due to both lower demand and tighter conditions under which banks issue new loans.

As for household loans, Ms. Lockgard said they have also become more expensive, especially due to higher mortgage rates.

This increase in borrowing costs and the subsequent decline in demand, combined with tightening credit criteria applied by banks, led to a further slowdown in the growth of new loans to households.

The ECB’s decisions and subsequent clarifications by Christine Lagarde led to the strengthening of the euro against the dollar. By noon, the euro was trading at $1.0606, compared to $1.0575 it opened in the morning.

As for bonds, the yields of most of them grew, with the German 10-year yield, which fluctuated from 2.20%from 2.11%.

In contrast, Greek 10-year bond yields declined marginally to 4.26%from 4.28% yesterday.