Bank turmoil casts shadow over Europe interest rate decision

Markets are watching to see if the ECB will stick to its path of steep rate increases aimed at fighting inflation or dial back to a quarter-point hike.

European Central Bank President Christine Lagarde said last week that a big interest rate increase was “very likely” at Thursday’s meeting. That was before Silicon Valley Bank collapsed in the U.S. and European bank shares plunged as fears spread of more widespread troubles at a time when banks are adjusting to rapidly rising interest rates.

Lagarde and the ECB have not made a public statement on the recent banking upheaval, including a stock plunge from major Swiss lender Credit Suisse and its move for financing from the Swiss central bank this week. ECB officials typically observe a silent period a week before a rate decision to avoid excessive market swings and speculation based on officials’ comments.