The European Central Bank may have to raise interest rates again at its next meeting on May 4 in case inflation keeps following the ECB’s economic projections made in March. So far, the ECB did not provide specific guidance ahead of the meeting, due to volatility in financial sector.
ECB chief economist Philip Lane told the Cyprus News Agency that the bank will be “data-dependent” on the decision before the meeting. He said that a raise in rates may happen “if the baseline we developed before the banking stress holds up.” Factors that may uphold the decision include inflation outlook, assessment of underlying price dynamics and the impact previous interest rate hikes had.
Market predictions foresee the ECB making a 25-basis point increase for the 3% deposit rate at the May 4 meeting and another 25 basis point increase in mid-2023. These predictions are lower than last month forecast when expectations were for twice as many rate increases.
Since last July the ECB raised interest rates by a total of 350 basis points.
