DWS: Interest rates expected to rise further in September

DWS: Interest rates expected to rise further in September

July 27, 2023

ECB
ECB.jpg

Ulrike Kastens, Economist Europe at DWS, responds to today's ECB's intereste rate decision.

'The European Central Bank (ECB) has delivered - as announced: Key interest rates will rise by another 25 basis points. But the very "hawkish tone" of the last ECB press release has been softened. Although the central bank expects the inflation rate to remain too high for too long, financing conditions had tightened and dampened demand. This can be seen as a success in bringing inflation down. This brings the end of the interest rate hike cycle within reach. As before, however, the ECB remains data-dependent. In our view, it now all depends on the central bank's economic growth and inflation projections in September as to how monetary policy should proceed. Although sentiment indicators are weakening significantly, inflation has not yet been defeated, especially since no relief is coming from wages and the labor market. We therefore continue to expect the key interest rate to be raised to 4% in September.'

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