The European Central Bank (ECB) council will meet in Frankfurt on Thursday to discuss the path forward for the eurozone. The ECB has so far been slower to tighten than other central banks – with the deposit rate still at minus 0.5 per cent.
Recent communications suggest the ECB is now ready to start tightening economic conditions to tackle rising inflation. However, the central bank is still cautious about the underlying economy, and interest rates might not be raised at the June meeting. Instead net asset purchases are expected to end then to allow a 'rate lift-off' at the meeting in July. If inflation settles above 2 per cent then further rate rises will follow.
The US Federal Reserve, which has already acted by increasing the Federal funds rate to 1 per cent this year, will find out if this is influencing inflation when CPI data is released on Friday. US price growth may indeed have peaked, having fallen 20 basis points on annual basis in April to 8.3 per cent. And recent disappointing numbers out of big US retailers Walmart and Target suggests demand for goods is cooling.