by Balazs Koranyi
FRANKFURT (Reuters) – European Central Bank (ECB) officials are converging on a quarter-point interest rate hike in May, although other options remain on the table and the debate is not not yet closed, five sources familiar with the talks said.
The ECB has raised rates by at least 50 basis points in the past six meetings in the face of inflation, but a range of factors now argue for greater caution, the sources told Reuters.
Uncertainty remains high after the turmoil in the banking system and monetary tightening has yet to fully affect the economy, so the need to act forcefully is less, the sources said.
They added that the peak in rates is now in sight and that it is safer to do this “last mile” in small steps. Another argument advanced in favor of a moderation in the cycle is that the ECB’s deposit rate, currently at 3%, is at a level that limits growth.
The sources added that the debate remains open and that the outlook could still change, especially depending on inflation in the euro zone in April and the ECB’s quarterly bank credit survey, which are both due to be published. May 2, two days before the ECB’s monetary policy meeting.
A spokesperson for the institution declined to comment.
(Report Balazs Koranyi, Laetitia Volga, edited by Blandine Hénault)
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