The move is considered fundamental, in order to bring inflation back under some order!
The big winner in European markets in recent days: Banks.
Tweet on ECB interest rates
The European Central Bank is raising interest rates!
— The_Journalbiz (@the_journalbiz) September 9, 2022
Shares of Bank of Ireland Group, Spain’s Banco de Sabadell and CaixaBank, Italy’s Intesa Sanpaolo, and Germany’s Commerzbank were recently all up about 4% or more, extending Thursday’s gains.
Driving the rally is the prospect of a rapid rise in interest rates, which can boost banking profits. The European Central Bank on Thursday not only bumped up its key rate but also—helpfully for banks— suspended a two-tier lending system.
European banks have dragged on the region’s stock market and lagged their U.S. rivals during a long period of loose monetary policy and slow economic growth that pinched their profits.
Recently the US dollar reached parity with euro, the last time the euro was at parity with the dollar was 20 years ago in November 2002.
The current situation of an one-to-one exchange is therefore an event of some economic significance.