Due to inflationary pressures heightened by the situation in Iran, the European Central Bank may soon initiate its first interest rate increase since 2023.
With the conflict persisting for over three months, international oil prices remain elevated. Economists surveyed by Bloomberg widely anticipate that the ECB's deposit rate will be raised by 25 basis points to 2.25%. This move would position the ECB as the first major central bank globally to raise rates in response to a regional conflict.
Similar to their counterparts in the US and UK, policymakers in the eurozone had previously adopted a wait-and-see approach, hoping the current inflationary wave would prove temporary. However, with peace talks making little progress and price pressures broadening beyond the energy sector, market expectations are growing that the eurozone will implement multiple monetary policy tightenings within the year. The latest quarterly forecasts are likely to show that inflation reached 3.2% in May and is highly probable to continue rising. Analysts expect significant upward revisions to inflation projections for both this year and next, along with increased attention on core inflation pressures.
The European Central Bank is scheduled to announce its interest rate decision at 20:15 Beijing Time on Thursday. ECB President Christine Lagarde will hold a press conference 30 minutes after the announcement, at 20:45.
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