Despite the pressures from the hawkish officials to increase interest rates by 50 basis points, the European Central Bank may raise interest rates by a smaller amount in July.
Economists expect the bank to start its tightening cycle with a 25 basis point hike. According to economists, the ECB will increase the interest rate, which is currently minus 0.5 percent, by 25 basis points each in July and September. ECB President Christine Lagarde also announced that the negative interest rate policy could end in the third quarter.
However, some officials have more hawkish rhetoric due to record-high inflation. Eurozone inflation reached a record 8.1 percent in May and reached four times the ECB’s target.
Due to the war in Ukraine and supply chain problems in Asia, inflation forecasts for this year and next year are expected to be revised upwards, and growth forecasts to be revised downwards.