Will rates go higher in Europe this week? Central banks confront stagflation threat
The European Central Bank is weighing potential interest rate hikes in June and July amid concerns over inflation and economic resilience, with a decision expected to depend on incoming data. While a 25-basis-point rate increase is anticipated by some economists, the ECB is likely to maintain flexibility without pre-committing to future moves. Central bank officials and analysts suggest a cautious, data-dependent approach as they balance inflation control against economic stability.
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Rakau added that the data needed to show sufficient evidence of second-round effects to push the ECB into action, but the bar is low."We expect signs of rising inflation expectations, a resilient labor market, contained economic damage and accelerating core inflation to trigger rate hikes in June and July," he said, noting: "This modest tightening balances the inflicted economic costs and the ECB's aim of capping second-round effects."The ECB's forward guidance will be closely watched on Thursday, as ever.
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