ECB to raise rates further even as economy stutters

The European Central Bank is all but certain to raise borrowing costs to their highest level in 22 years on Thursday and leave the door open to more hikes, extending its fight against high inflation even as the euro zone economy flags.

Growth across the 20 countries that share the euro is at best stagnating and inflation has been moderating for months, courtesy of lower energy prices and the steepest increase in interest rates in the ECB’s 25-year history.

Furthermore, the U.S. Federal Reserve broke a string of 10 successive rate hikes late on Wednesday, a powerful signal for investors around the world that the current tightening cycle across developed economies is nearing an end, even if more U.S. rate hikes are still possible.

But inflation in the euro zone is still unacceptably high for the ECB at 6.1% – more than three times its 2% target – and underlying price growth, which typically excludes food and energy, is only starting to slow.

That is likely to keep the ECB on the tightening path, particularly after it failed to predict the current bout of high inflation and began raising rates later than many global peers last year.

This report’s information was first seen on REUTERS; to read more, click this link.