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Essentials of Monetary Policy

Rates Raised Another 50 Points Despite the Recent Market Turmoil

March 16, 2023
Hendrix Vachon
Principal Economist

The tensions that have recently emerged in the financial system add a lot of uncertainty and could have prompted the ECB to be more cautious. Lastly, the still-too-high inflation justified further monetary tightening.

If financial tensions ease, the ECB is likely to continue monetary tightening, but if the situation worsens, it may want to take a more cautious approach. For now, we expect two more 25-basis-point increases by the summer.