Analysts indicate that in response to the impact of the Iran conflict, the European Central Bank is expected to implement one interest rate hike in June, followed by rate cuts next year to safeguard economic growth. A survey revealed that nearly all respondents anticipate the ECB will maintain the 2% deposit rate unchanged on April 30. Subsequently, based on clearer projections illustrating the conflict's economic impact, a 25-basis-point rate increase is anticipated at the following meeting. Among those forecasting a June hike, half also project at least one interest rate reduction before the end of 2027. Median forecasts suggest the deposit rate will return to 2% by September 2027. ECB Chief Economist Philip Lane and other officials have stated that they are unlikely to obtain sufficient information this month to determine whether the surge in oil and gas prices has significantly affected household and business inflation expectations. Meanwhile, they emphasize close monitoring of such signals and readiness to act if necessary. "The progression of the conflict itself and the trajectory of energy prices are both challenging to predict," commented Deka Bank economist Kristian Toedtmann. "However, it is also difficult to imagine that the indirect impacts and second-round effects on inflation would be so minimal that the ECB could overlook these fluctuations." The Eurozone's Consumer Price Index rose 2.6% year-over-year in March, marking the highest level since mid-2024. Expectations for sales prices and concerns about inflation are also increasing.
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