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European Central Bank hikes interest rates by 0.50%

Yahoo Finance Live anchors discuss the European Central Bank’s decision to raise interest rates for the first time since 2011, the energy crisis, and the resignation of Italy’s prime minister.

Video Transcript

JULIE HYMAN: We are going back to Europe for thing three this morning because there's still a lot going on over there. Today, headlining it, the European Central Bank just approving a 50 basis point rate hike that was expected that they were going to raise. There was a little bit of suspense over how much. It's the first time the ECB has raised interest rates in a decade. Also unveiled a new bond buying program to keep borrowing costs in check.

So, interesting there in terms of what we're hearing from the ECB and what is really, you could argue, a more acute situation over in Europe even than here in the US, because the energy crisis has really exacerbated the issue there. On the energy crisis front, now the Nord Stream pipeline is, indeed, open again, but it's only transporting 40% of its capacity. So, a relief, but not, I guess, a total relief. And Vladimir Putin warning that we could still get another shutdown because there's another turbine that they need to bring online to get it working, as it should be.

BRIAN SOZZI: And this comes alongside, of course, that the mess that is Italian politics with Mario Draghi offering his second resignation this morning. My takeaway is this. Now you could see probably a globally coordinated move higher in bond yields. And what does that mean to markets? The market is shrugging this off, but maybe it shouldn't be.

BRAD SMITH: Yeah, but we also have to remember as well that European countries are more likely either in a recession or going to face a harder hit recession than we will see here in the US, at least earlier on. And so as of right now, with this rate raised by 50 points, first in 11 years that we've seen like this from the ECB, they're trying to look for this inflation target to return to 2% over this medium term. The question mark is, does that tip them into a deeper recession perhaps over an extended period of time?

BRIAN SOZZI: There is no decoupling. We learned that in the Great Recession.

JULIE HYMAN: Right, so--

BRIAN SOZZI: We're all connected.

JULIE HYMAN: Yeah, so, obviously, that's something that we need to keep an eye on. And I'm just looking through some of the headlines from the Christine Lagarde comments at the press conference there and this new tool that they are talking about using. So I'm going to look a little bit more into that and see how that is going to play out. We saw there the euro reaction just a few moments ago.