Euro Area Resilience Spurs Calls for Another ECB Rate Hike
The euro area economy is showing resilience, and economists at Barclays believe this could lead to another interest rate hike by the European Central Bank (ECB) in September. The bank's strategists pointed out that headline inflation is set to rise sharply in August, with France's year-on-year inflation rate increasing to 2.7% from 2.4%, while Spain's jumped to 4.5% from 3.9%.
The ECB Executive Board member Isabel Schnabel recently stated that rates may need to rise further due to the prolonged Middle East conflict and the euro area's stronger-than-expected resilience as upside inflation risks.
Barclays estimates euro area GDP growth at 0.45% quarter-on-quarter in the second quarter, driven mainly by external demand, while domestic demand remained subdued.