ANZ Bank: European Central Bank Will Not Pause Its Tightening Cycle

ANZ analysts believe that the ECB will not pause its tightening cycle. The ECB is expected to raise rates by 25 basis points this week to balance the lagged effects of previous hikes, recent banking turmoil and further rate hikes. However, before the meeting, the ECB will release the latest bank lending survey, M3 data, unemployment rate and preliminary April CPI data.

The ECB will take this information into account when deciding how much to raise interest rates. Clearly, if the annual rate of core inflation is still climbing, while bank lending conditions and credit conditions remain good, the ECB may raise interest rates by 50 basis points. 

The issue for the ECB is how long inflation will persist and whether second-round effects are emerging. The bank’s tightening policy may continue into the third quarter.

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