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The European Central Bank Increases its Base Interest Rate by 0.5 Percent, Despite the Chaos in the Banking Sector

BlockNews Team by BlockNews Team
March 21, 2023
in Finance, Investing, Media, Politics
European Central Bank
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  • Even amidst the chaos in the United States banking sector, the European Central Bank increases base interests in its fight against inflation.
  • European Central Bank announces intentions to prioritize fighting inflation.
  • The United States banking sector is in a state of disarray.
  • Inflation has gone down to 6%, which is a considerable decline from its 9% high last year but still higher than the 2% it was formerly at.

While the United States banking sector and the banking sector, in general, have been in turmoil for the past week, the European Union has increased its base interest rate by 0.5 percent.

However, there had been rumors that the economists in Brussels would ask for a minor increase in their interest rate after watching the crisis triggered by the collapse of three banking institutions in the US unfold last week.

The news of the increase in the interest rate spread panic to Credit Suisse, whose material weakness was uncovered in a financial report, with a gaping need to borrow $54 billion.

The president of the European Central Bank, Christine Lagarde, also indicated that they had decided to put the battle against inflation and put it under control as a top priority while also calling the European banking sector a resilient one, with an added warning of the potential of inflation going on for too long.

While traders had hoped that the central bank would demand a modest 0.25 increase in rate after the collapse of Silicon Valley, Silvergate, and Signature, that was not the case. The latest consumer price index reading is at 6%.

6% is considerably higher than the target of 2%. Inflation is starting to see a decline considering how it surged beyond 9% last year.

A spike of nine-month highs of $26,514 during the week, pushed forward when the United States government took over Silicon Valley bank, also affected cooling Bitcoin down.

The disarray in the United States banking sector has put the financial institution space on edge. Other institutions like Anchorage are opting to lay off workers to keep their businesses afloat and focus their resources. While they did not respond to that being the reason, there is a fair chance it could be attributed to that.

Conclusion

Anchorage laid off 75 of its employees when news of the decline in the United States was spreading, so other institutions may follow in their footsteps to keep their business afloat.

The collapse of Silvergate bank, Silicon Valley Bank, and signature bank caused a lot of chaos in the crypto space. It has left crypto companies exposed to them scrambling and announcing their exposure while discussing how to retrieve their funds from the collapsed banks.

Tags: BankingEUEuropean Central BankInterest RatesPolitics
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