Interest rates in Europe expected to rise due to inflationary pressure

Published: 9th September 2013

Members of the governing council of the European Central Bank are set to announce increases in interest rates in response to rising inflationary pressures, with expectations of a rise around 50 basis points throughout 2011. Interest rates have only recently been increased the current levels (the first change since July 2008), and are currently set at 1.25%.

With issues such as the sovereign debt crises making news headlines throughout the Eurozone, the interest rate changes look set to reflect the delicate balancing act currently being managed by the ECB. With recent data showing that inflation rose to almost 2.7% in March (the fastest rate since October 2008, and above previous estimates of 2.3% for the year), the pressure on the European Central Bank to act is increasing steadily. However, whilst the strong economic performances shown by the German economy reflect the return to growth in some areas, the recent changes could increase the economic pressures on other member states such as Portugal, Greece and Ireland.

With the International Monetary Fund recently increasing its growth estimates for Europe in 2011 to 1.6%, and many feeling that Portugal will be the last member state to request funding from the ECB, there are signs that the European Economy is showing early signs of emerging from the downturn. That said, it is undoubtedly a delicate balancing act between the various member states, and the overall concensus is that numerous other hurdles will require passing before long term consistent growth is acheived throughout the Eurozone.

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