The ECB will not follow the path set by the Fed and will raise interest rates again today

The European Central Bank (ECB) is expected to raise its interest rates by a quarter of a percentage point this Thursday, continuing the gradual slowdown in its adjustments and allowing official rates to cross the limit of the 4%despite the fact that United States Federal Reserve (Fed) yesterday announced a temporary halt to its rising cycle.

The Governing Council of the ECB will meet this Thursday to decide what to do with interest rates at a time when the inflation it is easing in both the United States and the Eurozone.

In the United States, interannual inflation was 4%nine-tenths less than in April, the second largest drop since the indicator began to fall in July 2022.

In the eurozone, headline inflation fell by nine-tenths to 6.1% year-on-year, while the core – excluding the effect of energy, fresh food, alcohol and tobacco – fell by three-tenths to 5.3%.

However, the President of the ECB, Christine Lagarde indicated on 5 June that “there is no clear evidence that underlying inflation has reached a ceiling” and reiterated the objective of bringing interest rates to “sufficiently restrictive levels” to bring inflation back to the 2%.

This assumes that today a new adjustment, the eighth in a rowwhich will see Eurozone rates reach their all-time high since the introduction of the single currency 20 years ago, namely 4% for the official rates and 3.50% for the deposit facility.

This Thursday’s decision will be the Euribor above 4%a record level not seen since 2008, which means that it can be expected that banks will continue to tighten risk criteria for granting mortgages and generally taking out loans.

Markets do not expect interest rate cuts before the end of 2023, but the question remains whether the hikes will stop in July or continue throughout the summer.