FRANKFURT (Reuters) – European Central Bank (ECB) officials only agreed to another sharp interest rate hike after Credit Suisse secured financial backing from the central bank Switzerland and the stabilization of financial markets, three sources told Reuters on Thursday.
These sources, close to the Governing Council, said that the sudden drop in the price of Credit Suisse on Wednesday, and by extension of the banks of the euro zone, had shaken the strategy of the ECB.
Some members advocated leaving interest rates unchanged and waiting for financial markets to calm down, rather than raising credit costs again with the risk of making the situation worse, the sources added.
But the decision of the Swiss National Bank (SNB) to support Credit Suisse with a loan of up to 50 billion francs reassured and gave the signal for a hike of half a point as planned, they added.
An ECB spokesman declined to comment.
Investors had doubted the will of the institution to raise its rates sharply on Thursday, some analysts instead anticipating a more moderate increase of 25 points.
But the sources said that scenario was never discussed, with discussions limited to a 50 basis point hike or no hike at all.
(Report Francesco Canepa and Balazs Koranyi, Laetitia Volga, edited by Kate Entringer)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
