The European Central Bank has gone ahead with a planned half-point rate hike but has stayed silent on what could follow amidst market turbulence that has rocked Credit Suisse. 

Despite the warning that inflation should remain “too high for too long,” ECB officials have refused to indicate what they will likely do at the following meeting. This breaks with practice amidst increased fears for financial stability.

The quarterly economic projections accompanying the announcement showed that overall inflation was slowing more than expected this year. But at the same time, core inflation, which excludes volatile elements such as food and energy, was higher. 
The question now is whether the recent banking woes limit its ability to cope with price rises that, while moderating, remain closer to two figures than its 2 percent target.

Before the turbulence at SVB and Credit Suisse, the ECB debate on rate-setting levels was already fierce, with Northern Europe advocating for more rate hikes and Southern Europe advocating for more moderation. With the record slump in Euro-era prices since November, the hawks have focused on underlying inflation, which hit a record high in February, to advocate for further hefty hikes.

The most notable argument was from Italian Ignazio Visco, who openly criticized officials advocating for “prolonged” rate hikes. His remarks came just days after Austrian Robert Holzmann had floated the idea that this week’s 50 basis point rise should be followed by three more.

Divisions within the council and political pressures will likely push the ECB to do less than what the market is anticipating, consequently weakening the Euro currency against the dollar.