This is the online version of today’s edition of the Inside the Stock Exchange newsletter, which analyzes the effects of the European Central Bank’s decision to raise interest rates, which was already expected by the market. To subscribe to this and other newsletters and receive them directly in your email, register here. UOL subscribers are also entitled to two more exclusive newsletters about investments.
The European Central Bank (ECB) signaled after this month’s policy meeting that it should kick off a cycle of interest rate hikes in July, raising the euro zone’s benchmark interest rate by 0.25 percentage point to 0.25% per year.
The move follows the trend that the Federal Reserve (Fed, the US central bank) and the Bank of England (BoE) had already signaled months earlier, by raising interest rates in the US and UK.
In addition, the market is already pricing in a rate hike at the September meeting, and ECB President Christine Lagarde said the institution will ensure that inflation converges to the 2% per annum target in 2023.
The eurozone has been suffering from rising prices in recent months, especially as commodities such as oil and natural gas have appreciated. Inflation in the 12 months ended in May is 8.1% in the bloc.
In this way, continental Europe will finally abandon negative interest rates, which worries local investors, who were already used to such a conjuncture.
The rise in interest rates in the euro zone was only a matter of time, and it was already on the radar of the main analysis houses and banks in the region. This trend anticipation should serve to stem the fall in equities, but European markets will inevitably react negatively to the news.
In addition, investors reflect on consumer inflation data in the United States in May, while assessing what the Fed’s stance should be in the coming months.
Read in ‘Investigando o Mercado’ (exclusively for UOL subscribers, who have full access to UOL Investimentos content): information about the merger between Aliansce Sonae and brMalls.
Levante’s Chief Strategist and Founding Partner
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