London Daily

Focus on the big picture.
Thursday, Oct 30, 2025

European Central Bank increases interest rate by 0.5%

European Central Bank increases interest rate by 0.5%

The European Central Bank pushed ahead with a large interest rate increase on Thursday, brushing aside predictions it might dial back as markets reacted to the collapse of an American bank and liquidity fears at Switzerland’s second largest lender.
The ECB hiked rates by half a percentage point to 3.5%, underlining its determination to fight high inflation of 8.5 %.

While some foresaw a smaller increase because of the banking turmoil, President Christine Lagarde repeatedly called the banking sector in the 20 countries using the euro currency “resilient,” with strong financial reserves and plenty of ready cash.

And if it became necessary, she said, the ECB is “fully equipped” to provide additional support to the banking system.

“We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability,” Lagarde said.

ECB Vice President Luis de Guindos said the eurozone’s exposure to Credit Suisse, which is outside the European Union’s banking supervision structure, was “quite limited” and “not concentrated” in any one place.

Their message follows the collapse of Silicon Valley in the US after suffering losses on government-backed bonds that fell in value due to rising interest rates.

Then, globally connected Swiss bank Credit Suisse saw its shares plunge this week and had to turn to the Swiss central bank for an emergency bail out.

The troubles at Credit Suisse dragged down the shares of stalwart European lenders such as Deutsche Bank, BNP Paribas and Societe General on Wednesday. Bank shares recovered Thursday.

Analysts say the share selloff was fed by investor fear that banks took added risks to increase investment returns during years of very low interest rates and some may have failed to safeguard themselves against those holdings turning sour as rates rose.

As for more rate hikes in Europe, Lagarde said “inflation is projected to remain too high for too long” and that further increases will be based on what the numbers show. She did not commit either way, unlike her stance before Thursday’s meeting when she said a rate increase was “very likely”.

“Markets are assuming that this may be the ECB’s last rate hike, but the reality is that developments in the banking sector could shift either way in coming weeks,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. “If the panic eases, the ECB is likely to resume tightening before long” with more increases.

Similar questions are being raised about what the US Federal Reserve will do at its meeting next week.

Fed Chair Jerome Powell said only last week that the ultimate level for rates would be “higher than previously anticipated,” leading some analysts to predict the Fed would raise by half a point after slowing the pace to quarter-point in February. Since then expectations shifted back toward a quarter-point.
Newsletter

Related Articles

0:00
0:00
Close
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×