The European Central Bank (ECB) and US Federal Reserve (or Fed) are set to raise interest rates again. According to news sources, the ECB could make the announcement on Thursday. Meanwhile, the Fed make move quicker and announce its hike on Wednesday, as another report claims.
Typically, raising interest rates is a response to inflation. Apex banks in charge of a country’s economy raise borrowing interest rates to slow down economic activity. Also, this is not the first time. ECB has raised its interest rates seven consecutive times and as for the Fed, this will be its tenth hike in rates.
“We expect the Fed to hike by 25bp next week and signal a pause in June, with a weak upward bias for rates going forward,” Bank of America economists told clients over the weekend. This means increasing interest rate by 0.25%.
There is doubt if the European bank will do something similar or opt for a raise of 50 basis point. It has done so the last three times it raised rates.
Heads of both banks will be having meetings from May 2 to decide how the institutions respond to inflation.
In the US, analysts and decisionmakers are predicting a mild recession by the middle of the year because of the slowing economy. However, they are divided on when next to expect interest rate increase. Some argue that it will be the last one in a while and others anticipate another spike in June.
Reuters mentioned that activities slowed on the forex exchange markets on Monday. Currencies like the Japanese yen fell by 0.2% to 136.67 per dollar and the New Zealand dollar lost 0.3% to $0.6172.
