The European Central Bank is expected to raise interest rates again this week, but remains cautious about future policy actions.
1 hours ago
The European Central Bank (ECB) is expected to raise its key interest rate for the second time this Thursday, marking the second rate hike since the outbreak of the US-Iran War, but it may issue cautious signals about further increases, as additional hikes would push borrowing costs to levels that suppress economic activity. Eurozone annual inflation rose to 3.3% in August, the highest level in nearly three years and well above the ECB’s 2% target. However, no signs have emerged of the second-round effects policymakers have been concerned about since the war led to the closure of the Hormuz Strait and a surge in energy prices. The longer the war persists and energy prices stay elevated, the greater the likelihood that workers will take action, policymakers note. They are particularly aware that household heating costs will rise sharply as the weather turns colder at the end of the year. ECB President Christine Lagarde is likely to stress the familiar line that interest rates are not on a preset path, especially warning investors not to assume further hikes are inevitable. At the same time, Lagarde is unlikely to rule out additional action, with some economists seeing rising odds of a third rate hike in December. (Jinshi)
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