Eurozone may see first rate hike in 11 years

The European Central Bank (ECB) is expected to raise interest rates for the first time in 11 years on Thursday, with media reports suggesting the hike could be larger than previously expected.

The regulator has for some time now been signaling a 25 basis-point increase in July and another, larger one, in September, but Reuters reported earlier this week that a 50 basis-point hike is also being discussed.

According to Reuters’ sources party to the discussions, the ECB board will decide on the size of the hike at its meeting on Thursday.

The sources also said some ECB governors are cautious about hiking rates, as it could hamper Europe’s economic growth, a prospect that policymakers are seeking to avoid as the Eurozone is already on the brink of a recession.

Still, analysts say that a tightening is imminent after euro area inflation hit 8.6% last month and is expected to keep rising in the near future, propelled by skyrocketing fuel and food prices. The euro’s recent plunge to a two-decade low against the dollar also adds to the inflationary pressures, making a rate hike unavoidable, experts predict.

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