July increase by ECB expected

Frankfurt: The European Central Bank is still on track to raise interest rates in July as Greece’s worsening debt crisis clouds the economic outlook in the run-up to next week’s policy meeting, a Bloomberg survey showed.

All 51 economists forecast the ECB to keep the benchmark rate at 1.25% at the June 9 meeting. The bank may increase borrowing costs by 25 basis points in July, a separate survey showed.

“Greek tensions will have only a limited impact on the ECB’s determination to raise rates in July,” said Juergen Michels, chief euro-region economist at Citigroup in London.

ECB council members including Italy’s Mario Draghi have signalled they see a need to raise borrowing costs further to fight price pressures even as investors become increasingly concerned that Greece may restructure its debt.