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European stocks close 2.8% lower as ECB says ‘significant’ rate increases still to come

European equities took heavy losses on Thursday as the European Bank took an aggressive tone and global markets fell after the latest policy update from the US Federal Reserve.

The pan-European Stoxx 600 closed down 2.8% for the time being, with technology losing 4.6%, retail falling 4% and travel and industrials falling 3.5%.

Thursday was a big day for central banks in Europe, with monetary policy decisions from the Bank of England, the European Central Bank and the Swiss National Bank. All three opted for rate hikes of 50 basis points to keep inflation in check.

But markets extended previous losses following the ECB’s announcement and comments from its president, Christine Lagarde, who stressed that “significant” further rate hikes would follow at a “steady pace”.

“If you compare it to the Fed, we have more ground to cover… We are not slowing down, we are going into the long game,” she said.

The major German and French indices both fell more than 3%, while the UK FTSE 100 lost 1%.

Markets in the Asia-Pacific region reacted negatively after the Fed raised its benchmark interest rate to a 15-year high and indicated it will maintain higher rates in 2023.

US stocks also tumbled during Thursday trading.

Federal Reserve Chairman Jerome Powell said Wednesday that recent signs of a spike in inflation were not enough for the central bank to ease rate hikes.

“Substantially more evidence will be needed to be confident that inflation is on a sustained downward path,” Powell said at his post-meeting press conference. US retail sales and unemployment claims are expected on Thursday, providing further indications about the state of health in the world’s largest economy.

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