Was the ECB rate rise a good move?

ECB RATE HIKE

Felix Martin, an economist in the Thames River global credit team, asks how the ECB's 25 basis-point hike will affect the credit markets.

At last, the waiting is over. After three years of the world’s major monetary authorities marching in lock-step on monetary policy, the ECB became the first G4 central bank to break ranks with its 25 basis point hike on 7 April. For many investors – especially those who remember the ECB’s rate increase in June 2008, a bare three months before the collapse of Lehman Brothers – Trichet’s eagerness to start tightening in an environment of ongoing financial fragility seems brave, if not foolhardy. The question on many investors’ minds is “What made him do it?” Trichet’s arguments One sh...