The European Central Bank (ECB) is expected to raise interest rates further on Thursday to curb high inflation in the euro zone. Falling energy prices have eased inflation somewhat, but food prices, for example, are still clearly rising.
By making borrowing more expensive, the ECB can control demand in the economy and it should stop prices from rising too fast. It remains to be seen how much the interest rate will rise. On average, economists expect interest rates to rise by a quarter percent.
However, it will not stop at this rate hike. De Nederlandsche Bank (DNB) President Klaus Knott has already indicated that the ECB may need to raise interest rates in the euro area in June and July. The International Monetary Fund (IMF) last week called on the ECB to keep raising interest rates until the middle of next year.
For consumers, a higher interest rate is noticeable, for example, when taking out a mortgage. Banks such as ING and ABN AMRO may also slowly raise their savings rates again due to the ECB’s higher interest rates.
In addition to rising consumer prices, policymakers in Frankfurt will also take into account the effects of recent turmoil in the financial sector in their interest rate decision. Three banks have collapsed in the US recently. Additionally, Swiss Credit Suisse ran into trouble. This large bank should be bailed out to prevent its financial stability from being at risk.
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