The European Central Bank (ECB) could raise interest rates by a quarter of a percentage point this week, making it among the first major central banks to respond to new inflationary pressure caused by the war in Iran.
The expected decision, which should be made on Thursday, comes at a time when rising energy prices are once again weighing on the Eurozone economy.
Unless ECB President Kristin Lagarde and her colleagues moderate investors’ expectations, markets will continue to count on at least one more interest rate hike by the end of the year.
Weaker growth in the eurozone
At the same time, new economic data show that the Eurozone economy is significantly weaker than previously expected.
The bloc’s gross domestic product fell in the first quarter, rather than rising, after a sharp downward revision of data for Ireland.
The OECD previously warned that the Eurozone could achieve a growth of only 0.8 percent this year, with the deterioration of the mood among consumers and companies.
Other central banks are more cautious
Unlike the ECB, most of the other central banks of the G7 countries are currently more cautious when it comes to further increases in borrowing costs.
The Bank of Canada could keep the interest rate at its current level, while the US Federal Reserve and the Bank of England are also expected to wait for new data before changing policy, he said.IrishExaminer“.
Analysts believe that the ECB will try to prevent inflation from taking root with its decision, but they warn that more expensive borrowing could further slow down the already weakened European economy.
For this reason, the messages from Frankfurt will be closely watched, as they could determine the direction of the monetary policy of the Eurozone in the coming months.
