The collapse of Silicon Valley Bank lowers the chances of the European Central Bank committing at this week’s meeting to another big increase in borrowing costs, according to Bloomberg Economics.
(Bloomberg) — The collapse of Silicon Valley Bank lowers the chances of the European Central Bank committing at this week’s meeting to another big increase in borrowing costs, according to Bloomberg Economics.
The US lender’s fall is a reminder that “when rates rise quickly things get broken,” Chief European Economist Jamie Rush said before Thursday’s planned half-point hike in the deposit rate.
“Coming so close to this month’s meeting, uncertainty surrounding SVB will reduce the appeal of pre-committing to a 50 basis-point hike in May,” Rush said. “We now expect the ECB to avoid sending a concrete signal.”
While European officials are playing down contagion risks from SVB, money markets are already betting that the peak of the ECB’s monetary-tightening drive will be much lower than where they saw it as recently as last week.
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