The European Central Bank is expected to hike interest rates again Thursday to fight inflation but at a slower pace, as higher borrowing costs take their toll and banking sector fears resurface.
The institution has lifted rates at an unprecedented pace since last year to combat spiralling energy and food costs, and there is little doubt it will deliver its seventh-straight increase.
"The majority of ECB members are likely to feel more comfortable with a smaller increase in key interest rates," said DWS economist Ulrike Kastens.The ECB's move will come a day after the US Federal Reserve made its 10th straight increase, raising borrowing costs by a quarter point. Despite the ECB's tightening, consumer prices rose in April after five consecutive months of declines, edging up to 7.0 percent on an annualised basis from 6.9 percent in March.But closely watched core inflation, which excludes volatile energy and food, fell slightly in April, its first drop for months and a potential turning point that gives ammunition to those calling to slow rate hikes.
Concerns about the banking sector -- and the impact on lenders of monetary tightening -- also resurfaced this week after the collapse of another US lender.
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