ECB's next step is unclear

European Central Bank Governing Board Member Isabel Schnabel said that increasing uncertainty was making it difficult to predict the next interest rate step. Speaking at the ZEW Institute in Mannheim, Germany, Schnabel said, “I cannot say what decision we will make at the next meeting and especially at subsequent meetings. The situation has become more complicated with the difficulties in the banking sector.” Schnabel stated that it has become more important to examine the upcoming data before the meeting and see whether the uncertainty will affect banking sector loans. Although the interest rate decision to be announced on May 4 highlights the options of a 25 or 50 basis point interest rate hike, there is no consensus among ECB members on the next step. Many members had stated that they would wait for new data to see the effects of the crises that shook the banking sector in the US and Switzerland. Goldman Sachs updated its final policy rate expectation to 3.75 percent after the waters calmed in the banking crisis. The investment bank lowered its final policy rate expectation to 3.5 percent following the collapse of Silicon Valley Bank (SVB) earlier this year.