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Euro zone braces for ECB rate hike


Euro zone braces for ECB rate hike


The European Central Bank’s widely anticipated euro zone interest rate hike to fight inflation is set to cause more problems for businesses and consumers, particularly in sovereign debt-ravaged countries like Greece, Ireland, Portugal and Spain.

It has already pushed the euro to fresh highs against the dollar, which is putting an added burden on those weaker countries.

Analysts are speculating on how much the ECB might put up rates from the current record low of one percent and whether it will be the first of a series that could extend into next year.

And for savers, hoping to get more interest from their money, there are no guarantees.

Investment adviser Max Herbst with FHM Finanzberatung said: “There may be some banks that will say we’ll pass on an interest rate rise to our customers immediately. But most banks will wait and see, to see if customers move to another bank that might offer higher rates. If customers stay and do not move to another bank, then there won’t be higher rates.”

For the policymakers at the ECB this is a difficult decision. They hope to keep inflation – now at 2.6 percent – from spiralling out of control but without weakening the region’s still fragile economic recovery.

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