As recently as 24 hours ago, the European Central Bank was widely expected to hike interest rates by half a percentage point Thursday in its fight against inflation. But Wednesday’s market turmoil could force a rethink. Banking stocks sold off sharply Wednesday, as concerns about the sector’s resilience in the wake of Silicon Valley Bank’s demise spread beyond the United States. Credit Suisse\n \n plummeted to a new record low.
“There are still huge uncertainties about what might happen next, but central banks … will now have to factor in the risk that the current situation snowballs into a broader loss of confidence in the banking system and a significant tightening in financial conditions,” he added. Inflation versus market turmoil At 8.5% in February, inflation in the euro area remains far above the ECB’s 2% target.