The European Central Bank raised its main interest rate from 1.25% to 1.50% today. The move by the ECB was widely anticipated, and we expect one more 25 basis points rate rise this year. We expect the ECB to keep raising interest rates at a rate of 25 basis points a quarter. While our forecast is more aggressive than the market is currently pricing, by historical residence, this is a slow rate normalisation path…
In addition to the change in interest rates today, the ECB announced that it was suspending the application of the minimum credit rating threshold in the collateral requirements for the purpose of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government. In other words, the ECB has removed the minimum credit rating of the collateral that Portuguese banks can use to access the ECB’s liquidity mechanism. This is clearly in response to the Moody’s downgrade of Portugal’s sovereign debt rating.
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Source: ETFWorld – Schroders