The euro zone economy is barely growing but inflation in the bloc remains high, leaving the European Central Bank with little choice but to inflict more financial pain on households and businesses to tame prices.
Buffeted for more than a year by the surge in fuel prices that followed Russia's invasion of Ukraine, people in the 20 countries that share the euro are now starting to feel the effects of the ECB's massive increase in borrowing costs.by just 0.1% in the first three months of the year as domestic consumption stagnated in many economies, a sign that surging inflation and falling real incomes are taking their toll on consumers.
"Individual country inflation data keeps pressure on the European Central Bank to remain aggressive on the hiking front at next week's central bank meeting despite euro-wide growth not that far from flatlining," said Charles Hepworth, an investment director at asset manager GAM Investments. Inflation data for the euro zone as a whole will be released on May 2, along with an ECB survey of banks that policymakers view as critical in informing their upcoming decision.Money markets currently price in another 70 basis points of ECB rate hikes by October, possibly followed by cuts as early as the start of next year.those expectations on Friday, calling on the ECB to keep raising interest rates until the middle of 2024.
"In the second half of the year the massive rate hikes by central banks worldwide are likely to apply the brake on growth," Commerzbank's senior economist Christoph Weil said., was already stagnating as a decline in government and household consumption offset an increase in exports and capital investment., Spain and, to a lesser extent, Portugal were the stand-out beneficiaries of a boost in trade, growing by 0.3%-0.
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