There isn’t much doubt that the European Central Bank will say on Thursday that it will end years of stimulus and raise interest rates for the first time since 2011 to stop record high inflation.
So, can we move on? Not quite. With inflation at 8.1% and growing, ECB head Christine Lagarde’s words will be closely watched to see 1) how big the ECB will go in July, when rates are expected to start going up, and 2) how high it is willing to raise rates.
Also, keep an eye on what the ECB says about how much help it might be willing to give to weaker economies when borrowing costs start to go up.
Money market prices, on the other hand, show that traders think a 50-bps move by the ECB is becoming more likely in the coming months.
Even though the outlook for growth has changed, many big central banks are choosing to raise rates more. Note that Australia raised rates by 50 bps, which was more than expected.
The key deposit rate of the European Central Bank (ECB), which has been stuck at -0.50 percent for a while, is about to leave negative territory.
The markets think the ECB will quickly raise interest rates.
In the meantime, worries about higher interest rates continue to keep the world’s markets on edge. Stocks in Asia are down, and both European and U.S. stock futures are in the red.
Even good news from China hasn’t done much to make people feel better: Data showed that China’s exports grew by 16.9% in May, which was much faster than expected and is a good sign for the world’s second largest economy.
And the yen’s value against the dollar fell to a new 20-year low. Since the Bank of Japan is stuck with a very loose monetary policy and most of its peers are quickly raising rates, the yen continues to bear the brunt of widening interest-rate gaps.
Key events that should give the markets more direction on Thursday:
According to the IMF, the recent’significant’ drop in the yen reflects fundamentals.
RICS: There are signs that the UK housing market is slowing down.
– Every three months, the Federal Reserve puts out financial accounts for the U.S.
– Governor of the Bank of Canada Tiff Macklem speaks
– The ECB meets, and there will be a press conference at 12:30 GMT.
– The Central Reserve Bank of Peru and the National Bank of Serbia get together
– U.S. initial jobless claims
– Sale of 30-year U.S. bonds
