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| Goldman Sachs predicts ECB to raise rates by 25 bps in May |
Goldman Sachs economists have revised their expectations for the European Central Bank (ECB) to raise interest rates by 25 basis points in May, instead of the previously estimated 50 bps. This change will push the terminal rate to 3.50% from 3.75%. The economists at Goldman Sachs stated that they believe the ECB is still in tightening mode despite the recent financial market volatility.
They also anticipate that Europe's core inflation will remain strong in the next few months, rising further to 5.8% year-over-year in March. The ECB has kept its interest rates at a record low of 0% for nearly six years and has been working on providing stimulus to the economy through other means, such as asset purchases. The expected rate hike in May could signal a shift in the ECB's policy, indicating that they believe the economy is recovering from the pandemic-induced recession.
