NEW YORK: The dollar fell and the euro rose on Thursday after the European Central Bank raised interest rates as planned despite market chaos in recent days, in a sign the Federal Reserve also will raise rates next week as both stay on track to tame inflation.
The dollar and euro stuck to a narrow range before the ECB announced a half-percentage point rate hike as promised to curb inflation, with markets pricing more than an 80% likelihood that the Fed will raise rates by a quarter point on March 22.
Treasury yields rose at the short end, while notes and bonds with maturities of 10 years or more fell after an initial volatile reaction by markets to the ECB decision.
“They managed to strike a balance that seems fit with a purpose, where you’re trying to take some steps in the fight against inflation, while also acknowledging that the world has shifted since you last met,” said Simona Mocuta, chief economist at State Street Global Advisors in Boston.
The ECB has raised rates at the fastest pace on record and the Fed at its quickest in four decades to curb high inflation.
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