ECB slows down pace of hikes and highlights bank lending survey results

Friday 05 May 2023

May 2023 | 2 minute read    


The European Central Bank met on 4 May and decided to increase interest rates by 25 basis points, bringing the deposit rate to 3.25%. This decision was expected by the consensus, even if a 50 basis points increase was not completely off the table.

President Christine Lagarde noted that more hikes could be expected, as the ECB will likely not put the tightening cycle on hold, as all eyes are on inflation. “Headline inflation has declined over recent months, but underlying price pressures remain strong”, clarified the head of the ECB.

The ECB did not provide any specific forward guidance, reaffirming that it will stay data dependent, focusing particularly on incoming economic and financial data, dynamics of underlying inflation and the strength of monetary policy transmission.

On this last aspect, Madame Lagarde mentioned the results of the latest Q1 Bank Lending Standard Survey; the survey shows how the tightening in lending standards persists and is higher than previously anticipated by banks in Q4, and net demand for loans to non-financial companies has decreased sharply. This seems to confirm the fact that the previous rate hikes are being transmitted “forcefully” to lending practices.

The other most relevant announcement was on the asset purchase programme (APP) quantitative tightening, with a step up with respect to current modest pace starting from July. At the same time, the full pandemic emergency purchase programme (PEPP) reinvestments have been confirmed “until at least the end of 2024”, together with the flexibility option of these reinvestments.


Source: Amundi Institute, ECB Meeting: Five takeaways, 5 May 2023


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Date of first use: 5 May 2023

Doc ID: 2887479