The European Central Bank (ECB) is holding a monetary policy meeting this Thursday, which could result in a new rise in interest rates, which analysts anticipate will be 25 basis points.
At the beginning of May, the institution that Christine Lagarde directs raised rates by 25 basis points to 3.75%, a moderation supported by the majority of the members of the Board.
Before that, the ECB had raised interest rates by 50 basis points.
The interest rate on main financing operations rose to 3.75%, the deposit facility rate rose to 3.25% and the interest rate applicable to the marginal credit facility rose to 4%, the highest level since October 2008.
However, according to the minutes of the last meeting, some members of the Governing Council defended a new rise of 50 basis points to control inflationary risks, a decision that “would more clearly demonstrate the determination […] achieve price stability in the face of high and more persistent inflation”.
Given this scenario, the ECB is now expected to raise interest rates again by 25 basis points, maintaining a restrictive policy until inflation returns to the 2% level, Banco Singular said.
In a ‘research’ note, BPI also expects a 25 basis point hike and the deposit rate to be set at 3.50%.
“Thus, the increases accumulated since July 2022 will increase to 400 basis points, but the movement in June assumes a more prudent pace and that will allow a better calibration of the appropriate degree of tightening that monetary policy must assume”, reads an informative note. . of the financial institution.
For BPI, it is also probable that the ECB indicates that it can carry out a new rise in July, “following the strategy of gradualness and prudence, and always conditioning decisions on the evolution of the data.”
In its May summary, the Competitiveness Forum maintained the expectation that the ECB would “raise rates at least twice in this reference rate hike cycle.”
In the same sense, ATL Capital assumes a new rate increase, which could be repeated in the next month.
Analysts at Nomura Bank (Luxembourg) also anticipate an increase of this order and expect the ECB to marginally reduce its GDP growth projections.
“The ECB will only begin to cut rates in the fourth quarter of 2024,” he stressed, quoted by the EFE agency.
On June 5, the ECB president said that if euro governments do not withdraw support for the energy crisis, there will be increased inflationary pressures, requiring “a stronger monetary policy response.”
“As the energy crisis fades, governments need to reverse related support measures quickly and in concert to avoid mounting inflationary pressures over the medium term, which would require a stronger monetary policy response,” Christine said. Lagarde.
The ECB started raising interest rates in July of last year, having previously approved several increases of 50 and 75 basis points.
In the statement issued in May, the institution did not give any clear indication of the continuation of the interest rate hike cycle.
The ECB’s future decisions “will ensure that interest rates remain at sufficiently restrictive levels to allow a rapid return of inflation to the 2% target in the medium term,” the text said.
Source: TSF
