Goldman Sachs predicts ECB to raise interest rates by 0.25

Economists at investment bank Goldman Sachs reversed their earlier forecasts of where the European Central Bank’s interest rates would ease – reflecting easing tensions in financial markets and persistently strong core inflation.

The ECB’s governing council should secure a quarter basis point hike each in May, June, and July, analysts at the famous bank led by Jari Stehn said in a note to clients on Tuesday.

A report by Bloomberg said a move of half a basis point at the first next meeting was entirely possible if statistical data previously supported it, including limited signs of further deterioration in bank lending conditions and firmer April inflation.

Analysts say the reasons for the slight gradualness of interest rate hikes include that recent banking stresses are likely to leave some mark on bank lending.

They expect sequential core inflation to cool in the coming months while global economic uncertainty has increased.

Investors seek refuge in gold bars

Gold has been climbing and may reach a new peak, thanks to a weak American currency and the belief that the US will no longer be using a strict economic policy. It has already reached its highest price in 13 months.

The price of the precious yellow metal is $2,023 per ounce at the time of writing this report. On Tuesday, the $2,000 mark was crossed for the first time since March 2022 after data showed that the number of vacancies at US employers fell in February to the lowest level since May 2021.

The data raised concerns that the world’s largest economy could be on the brink of recession while increasing the likelihood that the Federal Reserve will further ease its interest rate hike cycle, Bloomberg writes.

The dollar’s decline this week was another positive for non-interest-bearing gold bullion, which could test the earlier high of $2,075.47 reached in August 2020.