The ECB will more than likely bring its main interest rate to 3.75% as economic indicators point to slowing of the real economy and loan demand slumping to a record low.
But as a July hike is widely expected, the real question at this week's meeting will be what will happen in September?FRANKFURT — The European Central Bank is set to hike rates once again on Thursday with market analysts certain that the Frankfurt intuition is nearing a peak despite inflation remaining stubbornly high.
The ECB will more than likely bring its main interest rate to 3.75% as economic indicators point to slowing of the real economy and loan demand slumping to a record low. But as a July hike is widely expected, the real question at this week's meeting will be what will happen in September?"We expect the ECB to follow through on the signaled hike this week to 3.75%," said Mark Wall, a chief economist at Deutsche Bank, to CNBC.
The ECB has hiked rates by 400 basis points since July last year, which is the fastest tightening cycle on record for the central bank as inflation soared to record highs prompted by supply chain disruptions and an energy crisis sparked by the war in Ukraine. This sharp rise in rates can have severe effects on loan growth in the euro area and thus on economic activity. "Firms' net demand for loans fell strongly in the second quarter of 2023, dropping to an all-time low since the start of the survey in 2003," the ECB said in a quarterly survey on Tuesday.
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