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European Central Bank keeps interest rates low and expects inflation to remain high

While rising inflation continues to threaten the Federal Reserve with rate hikes, the ECB has taken a different approach. Bank president Christine Lagarde said they “will not rush to a decision”, viewing inflation as just a short-term problem. Interest rates remain unchanged As reported by CNBC, the ECB’s refinancing rate remains at 0%. Meanwhile, the marginal lending rate remains at 0.25% and the deposit facility rate at -0.5%. The decision may come as a surprise given the region’s rising inflation, which is comparable to that of the United States. Euro-zone YOY inflation stood at 5.1% in January, eclipsing the 4.4% inflation expected by economists for the month. Lagarde admitted earlier today that inflation is expected to last longer than expected but will cool down towards the end of the year. About two months ago, she made similar comments, describing inflation as a “bump” that eventually falls to the bank’s target rate over the course of 2022. Nevertheless, she said short-term inflation risks are “tilting upwards,” which the bank expected in December. Should the economy return to full throttle, inflation could rise even further. “We had a very thorough and in-depth discussion about inflation,” Lagarde said. “We are focused on the latest information we have, but also on the impact this will have on our medium-term outlook.” The president compared European inflation to that in the US and stated that it is currently driven by supply rather than demand. “It’s unlikely we’ll see the same kind of inflation hikes as the US market,” she concluded. What Banking Policies Mean for Crypto Over the past two months, the Fed has repeatedly claimed it will raise interest rates from March to combat inflation, which hit a 40-year high at 7% in December. These comments tend to rattle both the cryptocurrency and the stock markets. Bitcoin is increasingly regarded as an inflation hedge for investors, due to its absolute fixed supply of 21 million coins. As such, news of higher inflation has historically pushed prices up, while concerns about higher interest rates have done the opposite. SPECIAL OFFER (Sponsored) Binance Free $100 (Exclusive): Use this link to register and get $100 Free and 10% Off Fees on Binance Futures First Month (Terms and Conditions). PrimeXBT Special Offer: Use this link to register and enter POTATO50 code to get 25% off trading fees.
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