Fear in the European stock markets: the ECB raised interest rates and inflation will continue

Financial Correspondent in the European Union.-

In a context of great volatility, the European stock markets breathed again today, although the fight against inflation did not end. He European Central Bank (ECB) again raised interest rates by half a basis point from 3% to 3.5%.

“We have shown in the past that the ECB can be creative if there is a liquidity crisis, but we don’t see that at the moment.” This was expressed by the president of the ECB, Christine Lagarde, at a press conference in Frankfurt, where she stated that “we are ready to intervene”, and confirmed that “inflation will remain high for a long time”.

“The euro area banking sector is resilient, with strong capital and liquidity positions,” Lagarde said, as the European Central Bank issued a statement today assuring investors that the region’s banking sector is sound, after fears of a new banking crisis rocked financial markets.

Meanwhile the Credit Suisse skyrocketed today thanks to the intervention of the Swiss Central Bank, which granted a large loan equivalent to 54,000 million dollars to the entity of his country that yesterday lost 24% of its value on the stock market, dragging in the panic and causing all the European stock markets to collapse and Milan, at the center of the storm, was the one that fell the most with -4.6%.

A decisive measure to reinforce -preventively- the liquidity of the bank at risk of default. Decision that reassured the markets generating today the rise in the Zurich Stock Exchange with a rising stock and a gain of up to 20% while on Wall Street the First Republic Bank it plunged more than 30% throughout the day and then reversed the gain positively. Action that opened the debate on whether central banks should continue with their hawkish aggressive monetary strategy.

In this context, the fear of another world financial crisis in the markets of the old continent generates panic among investors who fear that, if it spreads, it will lead the main developed economies into recession. In principle, it may happen that banks begin to be much more selective when it comes to investing their liabilities, which may end up contracting the supply of credit in Europe, thus penalizing economic growth.

For now, the Italian government has shown confidence in the resilience of the country’s banking system, while the Premier, Giorgia Meloni, announced the “maximum government attention to financial markets”at the same time that the Minister of Economy, Giancarlo Giorgetti, affirmed that “Italian banks are solid. The rules of our banking system are different from those of the American one”, in reference to the bankruptcy of the Californian Silicon Valley Bank (SVB).