Fund managers react to ECB rate hike

The European Central Bank announced 75-basis-point to 1.9% interest rate hike on Thursday to control soaring inflation.

The rate marks the highest single-day rise since 2009. The move comes as the region experiences record inflation. The bank said, “Inflation remains far too high and will stay above the target for an extended period.”

In September, inflation in the eurozone rose to 9.9% from 9.1% in August. That is five times the target set by ECB. Due to these alarming inflation figures, “it was all but guaranteed that they would hike aggressively by 0.75% today”, said Charles Hepworth, investment director at GAM Investments.

If the inflation remains ‘far too high’, the ECB may take further aggressive measures in the next meeting in December.

The central bank of 19 countries said: “The Governing Council took today’s decision and expects to raise interest rates further to ensure the timely return of inflation to its 2% medium-term inflation target.”

Commenting on the necessary measure made by ECB, Neil Birrell, fund manager at Premier Miton Investors, said, “Let’s be clear, inflation is the primary fear, not recession, and beating it is the most important battle to win.”

While Gurpreet Gill, macro strategist at Goldman Sachs Asset Management, said: “Today’s rate decision confirms that the ECB remains focused on strengthening core inflationary pressures, including rising rental costs, which are at a 14-year high.”

© 2022 funds europe

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