FRANKFURT – Euro area central bankers are widely expected to leave key interest rates unchanged Thursday amid mounting evidence that the Iran war is driving consumer costs higher as it undercuts economic growth.
Traders and economists agreed that any policy action from the public lender will come at the next decision-making meeting of the European Central Bank in six weeks, with both calling for a 25 basis-point hike at that juncture.
Preliminary data for April Eurozone annual inflation and Q1 GDP are due just hours before the ECB is set to announce its decision, and neither data point is likely to garner applause at the bank’s headquarters in Frankfurt. An economists’ poll said headline annual price growth this month is expected to rise three-tenths to 2.9%, which would be the highest mark since the end of 2023 and nearly a point more than the central bank’s target of 2% over the medium term. Euro area economic growth is forecast at 0.2% q/q, with the first month of the war – March – part of the mix.
Initial inflation data due out of Spain Wednesday morning and Germany later that day could suggest a trend for the overall European number.
Out with the old
Before the US and Israel attacked Iran on 28 February, it looked as if the ECB had tamed inflation in the single currency area, and staying the course on interest rates appeared to be the plan for the rest of this year and part of 2027. Now, many analysts expect a second hike after a likely upward adjustment in June.
So far, bank officials are steering the market toward a hold, according to Helaba. “ECB President Christine Lagarde pointed to a lack of data on the duration of the energy price shock and how strongly it is impacting general consumer prices. There still seems to be an expectation that the war in the Persian Gulf will soon be over and that the economic effects will therefore remain manageable. Most of the analysts surveyed on monetary policy – including us – are banking on this scenario.”
Helaba’s view is that euro area lender will likely forego reaction to the situation until June. “At that time, the ECB will also publish its new growth and inflation forecasts and thus have a better basis for its arguments.”
Deutsche Bank said the need for more fact-finding supersedes policy adjustments, at least this month. “The ECB has signalled it will be sitting on its hands at the April governing council meeting. There is too much uncertainty about the status of the conflict in the Middle East and what it means for energy prices on the one hand, and about whether and how the energy price shock will propagate into inflation on the other. The ECB will wait and gather more information before deciding in June if it should tighten monetary policy.”
The information to date has been concerning. Along with March’s inflation spike to an upwardly revised 2.6% from 1.9%, German business confidence this month fell to its worst mark since the height of the pandemic in 2020. And the preliminary Eurozone composite PMI reading for April fell to 48.6 points, pushing it into contraction territory below the 50 mark and its lowest result in 17 months. The services reading was the worst in more than five years. The manufacturing index surged to its best mark since May 2022, but analysts warned that the jump was due to additional production driven by war-related fears of inflation and supply shortages, which have spurred some companies to build stocks.
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- Market expects hike in June
- Inflation, GDP data due just hours before rate announcement
- ECB decision set for Thursday at 13:15 GMT / 14:15 CET
- Press conference slated for 13:45 GMT / 14:45 CET
By Eric Culp
European Editor, LiveSquawk News
@eculp.bsky.social
@EricCulpLS
28 April 2026 | 10:15 GMT
FRANKFURT – Euro area central bankers are widely expected to leave key interest rates unchanged Thursday amid mounting evidence that the Iran war is driving consumer costs higher as it undercuts economic growth.
Traders and economists agreed that any policy action from the public lender will come at the next decision-making meeting of the European Central Bank in six weeks, with both calling for a 25 basis-point hike at that juncture.
Preliminary data for April Eurozone annual inflation and Q1 GDP are due just hours before the ECB is set to announce its decision, and neither data point is likely to garner applause at the bank’s headquarters in Frankfurt. An economists’ poll said headline annual price growth this month is expected to rise three-tenths to 2.9%, which would be the highest mark since the end of 2023 and nearly a point more than the central bank’s target of 2% over the medium term. Euro area economic growth is forecast at 0.2% q/q, with the first month of the war – March – part of the mix.
Initial inflation data due out of Spain Wednesday morning and Germany later that day could suggest a trend for the overall European number.
Out with the old
Before the US and Israel attacked Iran on 28 February, it looked as if the ECB had tamed inflation in the single currency area, and staying the course on interest rates appeared to be the plan for the rest of this year and part of 2027. Now, many analysts expect a second hike after a likely upward adjustment in June.
So far, bank officials are steering the market toward a hold, according to Helaba. “ECB President Christine Lagarde pointed to a lack of data on the duration of the energy price shock and how strongly it is impacting general consumer prices. There still seems to be an expectation that the war in the Persian Gulf will soon be over and that the economic effects will therefore remain manageable. Most of the analysts surveyed on monetary policy – including us – are banking on this scenario.”
Helaba’s view is that euro area lender will likely forego reaction to the situation until June. “At that time, the ECB will also publish its new growth and inflation forecasts and thus have a better basis for its arguments.”
Deutsche Bank said the need for more fact-finding supersedes policy adjustments, at least this month. “The ECB has signalled it will be sitting on its hands at the April governing council meeting. There is too much uncertainty about the status of the conflict in the Middle East and what it means for energy prices on the one hand, and about whether and how the energy price shock will propagate into inflation on the other. The ECB will wait and gather more information before deciding in June if it should tighten monetary policy.”
The information to date has been concerning. Along with March’s inflation spike to an upwardly revised 2.6% from 1.9%, German business confidence this month fell to its worst mark since the height of the pandemic in 2020. And the preliminary Eurozone composite PMI reading for April fell to 48.6 points, pushing it into contraction territory below the 50 mark and its lowest result in 17 months. The services reading was the worst in more than five years. The manufacturing index surged to its best mark since May 2022, but analysts warned that the jump was due to additional production driven by war-related fears of inflation and supply shortages, which have spurred some companies to build stocks.
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