The ECB may raise the rate in July

The European Central Bank, the regular meeting of which will be held on Wednesday-Thursday, is expected to announce plans for the first increase in the key interest rate since 2011. The regulator will also present new economic forecasts, which are likely to show that inflation in the eurozone will not fall to the target of 2% during 2024.

Economists mainly predict that the ECB will announce its intention to complete the asset repurchase program in June and raise the deposit rate in July. At the moment, the rate is minus 0.5% and it has been below zero since 2014. Market participants also hope to receive signals about how much the central bank plans to raise the rate in July, and at what pace it intends to increase it in the future.

The main forecast of experts includes the probability of a rate hike by 50 basis points at once at the July meeting. The last time the ECB raised the rate by 50 bps was in 2000. It is also expected that the regulator will bring the rate to zero in the third quarter. 

It is worth noting that the growth rate of consumer prices in the eurozone accelerated to a record 8.1% in annual terms in May. As a result, even the most staunch adherents of the «pigeon» rhetoric were forced to support the need to raise rates. At the same time, the main task of the ECB will be to restore control over prices, avoiding recession and panic in the bond markets of the most vulnerable countries of southern Europe.