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European Central Bank action faces stiff early test as the economy teeters on the brink of recession

2022-07-23 09:35:45       source:CNBC

July 22, 2022

The European Central Bank toughened its anti-inflationary stance with a 50 basis point hike to interest rates and announced a new anti-fragmentation tool, but analysts are unconvinced that these measures will tackle the euro zone’s myriad of economic challenges.

The 50 basis point increase to the key rate on Thursday was broadly well received by the market and commentators, with inflation running at a record high in the 19-member common currency bloc and the ECB lagging behind its peers in kickstarting the process of monetary tightening.

However, the aggressive move comes against a backdrop of slowing growth and risks tipping the economy into recession, as the external pressures arising from the war in Ukraine and associated energy supply concerns show little sign of abating.

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