ECB Quarterly Survey of Bank Lending and April’s Eurozone Inflation Reading: What to Expect and How They Could Impact ECB’s Interest Rate Decision

The European Central Bank’s quarterly survey of bank lending, set to be released on Tuesday, will provide insight into the effects of recent financial sector turbulence on credit growth. Following this, Eurostat will publish April’s inflation reading, with analysts expecting an increase in the headline measure but a decrease for the underlying gauge that policymakers currently pay more attention to. The ECB’s 26-member Governing Council must decide whether to raise the deposit rate, now at 3%, to combat consumer price gains that remain above the 2% target. It is unknown whether a 25 or 50 basis-point hike will be implemented, as officials are waiting for remaining data from the survey and the Federal Reserve decision on Wednesday. The ECB’s “biggest challenge” is to set the right policy calibration, with the impact of the financial ructions and receding banking risks both to be taken into account. Veronika Roharova, the head of euro area economics at Credit Suisse, stated that signs of stress feeding through and accelerating tightening would rule out a 50 basis-point hike.