At 17:15 GMT+4 today, the ECB is set to announce its latest decision regarding interest rates. Expectations point towards a 50 basis point hike for the sixth time in a row, bringing rates to 3.50% with additional hikes expected in the future.
This is according to statements from members of the European Central Bank who stressed the need to continue raising interest rates and keeping them higher for longer.
A scenario where interest rates even rise above 4% is one that cannot be ruled out. But as always, the biggest determining factor for the ECB’s final interest rate will be inflation.
Inflation in the eurozone has declined for three consecutive months, but rose again slightly during February to reach 8.5%. This indicates that prices have not yet stabilized, and fears of inflation are still persistent. It appears the region has a long wait before inflation returns to the ECB’s 2% target.
The interest rate announcement will be followed by the ECB’s press conference, discussing the factors that led to the policy decision, along with other insights including future economic expectations.
Analysts expect that any strong hints of additional future interest rate hikes may provide positive support for the euro in the currency markets.
Remember that markets have different ideas and convictions in the way they interpret the information issued, and therefore prices cannot move 100% according to that information.
Figure 1: EUR/USD, Metatrader5, CFI
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