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The monetary authority has explained that it plans to continue raising rates after this large increase – the highest so far – because “inflation remains too high and is likely to remain above target for an extended period”.
With rate expectations rising, fixed income assets have also fallen in value, generating a nasty positive correlation between bonds and equities on the way down.
This follows the strong commitment of the Governing Council’s to make sure inflation returns to its 2% target over the medium term.
Federal Reserve increased policy rates by 75 bps to a range of 1.50-1.75 percent in June meeting.
In this way, the European Central Bank announces the first rate hike in 11 years and anticipates that there will be another hike in September.
Higher fuel prices mean that the cost of ownership of a gasoline or diesel-powered vehicle becomes significantly more expensive.
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