– A euro-zone interest-rate hike in the coming week is set to place the European Central Bank at the vanguard of global tightening caused by the Iran war.
Most Read from Bloomberg The quarter-point increase expected for Thursday would be the most notable move so far, given that similar action in advanced economies has taken effect in much smaller jurisdictions, from Australia to Norway
Unless ECB President Christine Lagarde and her colleagues challenge current investor bets, monetary policy will stay on track for further tightening, with at least one more hike penciled in for the remainder of the year. While observers anticipate a similar trajectory from the Bank of Japan, which has a much lower benchmark, other Group of Seven central banks are far less inclined to raise borrowing costs at present. On the eve of the ECB decision, the Bank of Canada may hold its own rate at the same level that’s prevailed since October.
And later this month, both the US Federal Reserve and Bank of England are likely to keep settings unchanged as they watch the impact from the Iran conflict play out. The response of officials in Frankfurt to the energy shock unleashed by US President Donald Trump’s attack on Iran will aim to ensure that the fastest euro-zone inflation since 2023 doesn’t become entrenched. But their action will come at the cost of constriction to an economy whose underlying momentum was already feeble.