ECB Unexpectedly Hikes Rates to Zero, Unveils Controversial New Plan for Distressed Countries – Mish Talk

Negative Rates in Europe Were a Failure, Now What?

In an unexpected move, ECB president Christine Lagarde Raised Rates by a Bigger-Than-Expected 50 Fifty Basis Points, all the way to zero.

The European Central Bank announced a larger-than-expected half-percentage point interest-rate increase and unveiled a new plan to buy the debt of Europe’s most vulnerable economies, taking bold action to protect the currency union as it navigates the twin threats of skyrocketing inflation and slowing economic growth.

It also said it had created a new bond-buying program, known as the Transmission Protection Instrument, which is aimed at ensuring the bank’s interest rates are transmitted smoothly across all countries of the currency union. The new tool “can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area,” the ECB said.

The decision sent European markets swinging. The euro initially surged before reversing its gains and turning lower to lose 0.1% against the dollar. It most recently traded at $1.1017.