Looking at the resilient movement of the Euro area banking sector, this is then coupled with substantial capital and liquidity position. Then inflation is projected to remain too high for too long.Based on this, the European Central Bank sets the interest rate at the correct figure.

On Thursday, the European Central Bank announced that the Governing Council decided to increase the three key interest rates. It is set at 50 basis points. And this is also in line with its determination to ensure a timely return in the medium term

The main target is inflation at 2%. During a media conference, ECB president Christine Lagarde and vice president Luis de Guindos said that their elevated level of uncertainty reinforces the importance of a data approach.

So this will be determined by its assessment of the future inflation outlook. With this in mind, the main focus for the European Central Bank is now on incoming economic and financial data

It is continued with concerns about underlying inflation dynamics, and the government and officials are working on monetary policy transmission to adapt with external challenges.

Euro Central Bank Increases Euro Zone Interest Rates Again, and Euro Gives Back Gains Afterward

For now, the governing council is closely monitoring current market tension. This will allow the central bank to stand in an area that preserves prices and financial stability. And because this also makes the euro area banking sector a resilient place.

With substantial capital and liquidity, the European Central Bank policy toolkit is fully equipped to provide liquidity support to the euro area financial system. The new Euro Central Bank then reports the recent emergence of financial market tensions and baseline path.

ECB staff now see that inflation will be in a still high area in 2023, maybe around 5.3%. But for 2024, it will decrease to 2.9%, and 2.1% in 2023. At the same time, the central bank decided to increase the eurozone interest rate again to contain inflation.

However, the Euro currency also positively impacted from here, where the projected growth of the Euro increased. Primary refinancing operations are determined based on movement in subsequent pace.

And this is also what made the Euro give back earlier small gains in trading on Friday. After the European Central Bank decided that they would continue to carry out the plan to increase interest rates by half a percentage point.

This 50 basis point hike also increased market volatility. And it is stated that the future rate path of the Euro may increase by around 0.25% this week.

Rate Hiking Still a European Central Bank Decision, Former ECB President Says that It is the Right Call

The European Central Bank has increased interest rates by 50 basis points. Many consider that the ECB does not adapt to financial market chaos. What's more, beforehand, investors' calls to dial back policy were tightening because of the emerging sentiment stability.

But the ECB responded by also increasing its deposit rate by 3%. The ECB said, "the elevated level of uncertainty reinforces the importance of a data-dependent approach, especially decisions relating to the Governing Council's policy rate of the Euro central bank,"

Even though there has been much debate, the former ECB president said this was the right decision. In this case, the former ECB president thinks this has to do with the fall of an American bank, namely Silicon Valley Bank, which lacks a rigid monetary base.

According to Adam Hoyes, an economist at Capital Economics, it was stated that the ECB decided to test how the effects of policies disrupt the central banks. There are still huge uncertainties about what will happen next, but this tightens financial conditions.

Attention turns to the ECB because investors are directing major and significant attention to the decisions that the Central Bank will make. Euro Banking has been resilient, and the Euro currency is in a strong position