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ECB’s Knot eyes +50 bps rate hike from +75 bps at December meeting


European Central Bank

European Central Bank

The European Central Bank (ECB) represents the central banking entity of the Eurozone which oversees the monetary policy of the bloc. As a growing geographic and economic region, the euro area now comprises 19 countries, which rely on the euro as their national currency. The Eurozone currently includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands , Portugal, Slovakia, Slovenia and Spain. In monetary policy, the ECB and the national central banks together constitute the Eurosystem, which mirrors the central banking system of the euro area. The main function of the ECB is to maintain price stability in the euro area and preserve the purchasing power of the euro. Founded in 1998, the ECB is also responsible for ensuring both the safety and stability of the banking and financial system in the EU region and in each member country. In addition, the ECB has also been mandated to oversee the conduct of foreign exchange operations. This includes the management of assets and the management of official foreign exchange reserves of Eurozone countries. How does the European Central Bank affect Forex? ECB policies can have a substantial effect on the value of the currency. euro, notably through changes in interest rate expectations. As a general example, when interest rate expectations rise, currencies tend to appreciate. When interest rate expectations drop, currencies tend to depreciate. For example, if the ECB keeps interest rates unchanged, but issues forward guidance that it may raise interest rates in the future, the value of the euro is likely to appreciate. The ECB mainly lowers interest rates when it tries to stimulate the economy.

The European Central Bank (ECB) represents the central banking entity of the Eurozone which oversees the monetary policy of the bloc. As a growing geographic and economic region, the euro area now comprises 19 countries, which rely on the euro as their national currency. The Eurozone currently includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands , Portugal, Slovakia, Slovenia and Spain. In monetary policy, the ECB and the national central banks together constitute the Eurosystem, which mirrors the central banking system of the euro area. The main function of the ECB is to maintain price stability in the euro area and preserve the purchasing power of the euro. Founded in 1998, the ECB is also responsible for ensuring both the safety and stability of the banking and financial system in the EU region and in each member country. In addition, the ECB has also been mandated to oversee the conduct of foreign exchange operations. This includes the management of assets and the management of official foreign exchange reserves of Eurozone countries. How does the European Central Bank affect Forex? ECB policies can have a substantial effect on the value of the currency. euro, notably through changes in interest rate expectations. As a general example, when interest rate expectations rise, currencies tend to appreciate. When interest rate expectations drop, currencies tend to depreciate. For example, if the ECB keeps interest rates unchanged, but issues forward guidance that it may raise interest rates in the future, the value of the euro is likely to appreciate. The ECB mainly lowers interest rates when it tries to stimulate the economy.
Read this term Board of Governors member Klaas Knot spoke this weekend in a television interview. Newswires picked up the comments:

Knot says he favors +50 or +75 in December

  • An increase of +75 “would be possible, but it’s too early to tell”
  • “We still have six weeks left and there are still a lot of economic figures coming out”

Knot tends toward the less dovish side of the European Central Bank spectrum.

Last week the EBC went with a +75:

The next meeting is December 15:


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