The European Central Bank raised interest rates by an unprecedented 75 basis points on Thursday in an effort to tame runaway inflation.
The ECB lifted its deposit rate to 0.75% from zero and raised the main refinancing rate to 1.25%, their highest level since 2011, as inflation is becoming increasingly broad and was at risk of getting entrenched.
Euro zone bank stocks <.SX7E > jumped as much as 2.4% to their highest level in more than 2 weeks before paring gains and trade up 0.9% by 1312 GMT. The broader euro zone stock market (.STOXXE) wavered before turning lower, last down 1%
The euro briefly edged up after the decision, but slid during ECB President Christine Lagarde's press conference. It was last 0.54% lower at $0.9951.
The bloc’s bond yields rose following the decision and Germany’s 10-year bond yield, the benchmark for the bloc, was up 5 bps to 1.62% by 1245 GMT, compared to around 1.58% before the decision, nearing the highest since late June.
Italian bond yields rose 2 bps to 3.88% . The closely-watched risk premium they pay over German peers tightened to 224 bps.
"I don’t think this will do much to help the euro, given the degree to which gas prices are driving the market, and the relentless nature by which the dollar continues to rally. It feels like a long shot to think that a 75bps hike will do much to control inflation, which will remain elevated, acting as a lead weight on the economy, as long as volatility in energy markets continues."
