By the summer at the latest: IFO expects a key interest rate of 4 percent

Prices are rising and rising, as is the pressure on the European Central Bank.

By the summer at the latest: IFO expects a key interest rate of 4 percent

Prices are rising and rising, as is the pressure on the European Central Bank. The IFO Institute therefore expects that the ECB will act - and that the key interest rate will soon be raised sharply. The US Federal Reserve could announce a rate hike as early as evening to fight inflation.

The IFO Institute expects the European Central Bank to raise its key interest rate to 4 percent by the summer. "Inflation jumped from energy and food to many other products over the course of 2022 and has thus become broader. There is a risk that inflation will solidify, which increases the pressure on the ECB to act," said IFO inflation expert Sascha carrot

In the last quarter of 2022, 74 out of 109 goods and services included in the German consumer price index showed an inflation rate of more than 4 percent. The prices of 28 goods and services even increased by more than 10 percent.

However, the price increase should slow down over the course of the year. "However, the increase in consumer prices excluding energy and food, the so-called core inflation rate, is likely to remain at 4.9 percent in Germany and thus well above the ECB target of 2.0 percent. Since a similar development is emerging in the rest of the euro area, the ECB will probably continue to tighten interest rates," said Möhrle.

On the currency market, investors are waiting for the Fed's decisions, which will be published in the evening. A further interest rate hike is firmly expected in the fight against inflation. However, the monetary watchdogs are likely to slow down and raise interest rates by only 0.25 percentage points. In the euro zone, an increase of 0.5 points is expected for the interest rate decision by the ECB on Thursday.

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