Their next steps are being considered. central banks around the world, with some arguing the possibility of completing them interest rate increases and some others to support them in their efforts to fight the sustained high inflation. The ECB appears to be in the second category at the moment, raising interest rates by at least 50 basis points in six consecutive meetings, the most in its history, to fight inflation.

According to a Reuters report, ECB policymakers agree on a 25 basis point rate hike in May, although there are other options, leaving discussion about the central bank’s actions open. Sources cited by the agency note that uncertainty remains at a high level after the turmoil that occurred last month in the financial sector. This uncertainty is also exacerbated by the fact that previous interest rate hikes have not yet been “seen” in the economy. Therefore, less monetary tightening is required as previous actions are still “acting” on the economy, say the same sources, fully aware of the ECB’s discussions. They went on to say that “the peak of interest rates is already near, and this last mile is safer to travel in smaller steps.” Another argument put forward in favor of gradual changes was that the ECB’s deposit rate, currently at 3%, is at a level that is holding back growth.

Markets are also discounting a 25 basis point increase in June, and a third of that increase is expected by September.

Sources said the debate is still open and the outlook may change, especially with inflation data for April and the ECB’s quarterly bank lending review due two days before the May 4 meeting. Some sources told Reuters they would prefer the ECB not report on its actions in June so that policymakers have a free hand on new economic forecasts.

It is noted that so far only a few representatives of the ECB have publicly spoken about their next step. For example, Klaas Nott, president of the Dutch Central Bank, said it was not clear whether 50 basis points would be needed or if 25 would be enough. another 50 basis point rate hike. Markets are currently discounting a 25 basis point increase in both May and June, with a third such increase expected by September. The “key” is structural inflation, which remains high in Europe and America. Sources who spoke to Reuters said the rate hike was necessary as headline inflation remains very high, while core inflation, which rules out food and energy price volatility, is expected to rise for several more months.

As for the Fed, the minutes of the March 21-22 meeting released yesterday show that several officials at the previous meeting considered putting a hold on interest rate hikes until it was clear that the collapse of the two regional banks would not generate wider pressure. However, they concluded that inflation remains the top priority and continued to raise the rate by another 25 basis points to a range of 4.75% to 5%. A Bloomberg report released earlier this week predicted the next move by central banks around the world, with interest rates at 5.25% by the end of 2023 and 4.25% in 2024. “The Fed is likely to raise rates another 25 basis points. at the May meeting, the interest rate, so it will be 5.25%. With recent OPEC+ cuts and a still-tight labor market, inflation is likely to remain close to the 4% range,” said Anna Wong, chief economist at Bloomberg Economics. As for the Bank of England, Bloomberg expects the key rate to remain stable at 4.25% until the end of 2023 and fall to 3.5% in 2024. “A slowdown in growth and the expectation of a big drop in energy prices could be enough for the bank to announce a halt to hikes, with interest rates stabilizing at 4.25%,” according to Bloomberg Economics.