(Bloomberg) -- Fears that anything but a half-point hike would trigger panic among investors helped settle the European Central Bank’s interest-rate decision on Thursday, according to people familiar with the talks.
As officials met over the past two days, traders were scouring financial markets for signs that other lenders might suffer the same strains that had hammered Credit Suisse Group AG and Silicon Valley Bank. ECB Vice President Luis de Guindos already warned European finance ministers earlier in the week that banks could be vulnerable to rising borrowing costs.
While the ECB dropped language in their Thursday statement on the future path for rates, there remains a live discussion on the need for more increases to bring inflation under control once market turmoil subsides, said the people who declined to be identified because such deliberations are confidential.
Several hawkish officials still see the terminal rate well above the current 3%, the people said, pointing to President Christine Lagarde’s remark that the ECB “would have more ground to cover” if its baseline outlook for the economy were to be confirmed. Yet, some are questioning whether the peak in borrowing costs might now be lower than previously thought.
An ECB spokesperson declined to comment.
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