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Renewables soften blow as Iran war pushes Europe’s power costs up

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As the Iran war disrupts global energy supplies and sends prices soaring, Drin River, which descends through the mountains of northern Albania, is providing a buffer against the shock.

Swelled by winter rains and snowmelt, and dotted with hydroelectric dams built during communist times, the river’s power provides ⁠more than 90% of the Balkan country’s electricity output, helping to keep wholesale ⁠prices in check.

Albania is an example of how countries with a higher renewables output have been protected from steep rises in electricity prices since the United States and Israel attacked Iran on Feb. 28, price comparisons from across Europe show. That could help households, businesses and growth in those countries as the price ​impact trickles down to ordinary consumers in the coming months, analysts said.

It could also bolster Europe’s green energy transition, which ​has ⁠been criticised for lacking urgency and has come under attack from the likes of U.S. President Donald Trump.

Countries heavily reliant on oil and gas face steeper price rises, adding to inflationary pressure and increasing the chance of a global recession – a familiar worry for Europeans who weathered the energy crisis triggered by Russia’s invasion of Ukraine in 2022.

The crisis is raising the regional price floor for everyone, but the countries with the least flexibility and the greatest marginal dependence on imported fuels are seeing the strongest impact in volatility and peak pricing, said Satyam Singh, analyst at energy research firm Rystad.

Power price differences emerge across Europe

Across the Adriatic Sea from Albania, Italy, which generates more than 40% of its electricity from gas, has seen a more than 20% rise in its benchmark wholesale contract since the war began. In gas-hungry Germany, the benchmark has risen over 15%.

In contrast, the benchmark in France, which relies on nuclear energy for 70% of its electricity production, has risen by less than half of Italy’s over the same period. In Spain, which has rapidly increased renewable output to nearly 60% of total generation, prices have fallen. Albania also recorded lower average prices in March compared to last year, thanks to ample hydro ⁠capacity.

Gas-dependent ⁠countries like Italy, Germany and Greece all have some level of solar power production, but over-reliance on solar causes what’s called the “duck curve,” where prices are low in the middle of the day but spike in the early morning and late afternoon.

“The goal for most of these countries like Italy and Germany is to build a huge stack (of renewables and long-term storage) that offsets gas. It’s going to be a big challenge,” said Alessandro Armenia, a power analyst at commodities data and analytics firm Kpler in Paris.

Meanwhile, coal-producing countries like Poland and Serbia have also fared well, analysts said. In Greece, which has strong solar generation, the power grid operator wants a lignite-fired plant earmarked for closure to stay open for at least another year amid the Iran conflict.

Businesses, households feel the strain

Power price shocks for households are expected to be more muted than the jumps in wholesale costs seen for oil and gas, analysts say, as it can take months for these increases to work through the system.

The European ⁠Commission has developed plans to cut electricity taxes as it seeks to cushion the fallout from the war, although officials and analysts warn that state costs could balloon as a result.

Consumers already struggling with a rise in oil-based fuel prices are worried about dearer electricity.

In Cyprus, where households pay some of the highest electricity prices in the EU, the country’s dominant power provider sees prices rising as much as 20% ​by August, in part because of its own duck curve.

When the Iran war erupted, fuel costs for Marios Georgiou, a machine operator at a printing works in Limassol, soared ​as much as 20%, forcing him to quit one of his jobs and find alternative work closer to home. Electricity bills already cost him 200 euros (about $234.8) a month.

“I’ve got two jobs and I can barely break even. Everything is just going up,” the father of two said.

He’s not alone.

Nico Vanni, 47, runs the ⁠La Nave bakery in ‌Castiglion Fiorentino, Italy. The ‌company uses about 2,000 liters of diesel a month on deliveries, and its ovens run on natural gas. Suppliers have already ⁠announced increases in the cost of yeast, paper and plastic – and that’s before any power price increases.

“We ‌can hold out for a few months, but not for long: the real risk is that we will have to intervene on staffing,” he said.

Old dams help Albania, but for how long?

In Albania, residents near the ​towering Vau i Dejes hydroelectric dam joke that hydropower is ⁠the only positive legacy of the country’s decades of communist rule.

“Albania’s heavy reliance on renewable energy, particularly hydropower, has played a crucial ⁠role in cushioning the country from the worst effects of the crisis,” Albania’s Energy Ministry said in a statement, although it acknowledged that it wasn’t immune.

The country still imports ⁠power when demand peaks, and consumers are protected ​by government price subsidies.

“The Iran conflict has increased pressure behind the scenes, particularly on public finances,” the energy ministry said. “The system is holding steady on the surface, while the real strain is accumulating underneath.”

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Türkiye’s military spending hits $30 billion in 2025: SIPRI

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Türkiye’s military spending increased by 7.2% in 2025, according to a report by a conflict ‌think-tank on Monday that also showed global expenditure hit a new all-time high, driven by wars and geopolitical tensions.

Türkiye’s expenditure reached $30 billion to make it the 18th biggest spender in the world, the Stockholm International Peace Research Institute (SIPRI) said.

The figure accounted for 1.9% of Türkiye’s gross domestic product (GDP), and the 2025 growth rate lifted the increase over the past decade to 94%.

The report showed global military spending rose by 2.9% compared with 2024 to nearly $2.9 trillion, marking an 11th consecutive year of growth.

That came despite a 7.5% reduction by the U.S., the world’s biggest spender, as President Donald Trump halted ​new financial military aid to Ukraine.

The 2025 total brought the growth over the past decade to 41% and took spending as a share of GDP ​to 2.5% – its highest level since 2009.

The top three military spenders, the U.S., China and Russia, accounted for a combined $1.48 trillion, or 51% of global spending.

The main ⁠contributor to higher global spending was a 14% rise in Europe to $864 billion.

In total, 22 European NATO members met the 2% of GDP benchmark. Their combined spending reached $559 billion to rise faster than at any time since 1953, according to SIPRI.

The expenditure of all the 32 NATO members amounted to almost $1.6 trillion in 2025, or 55% of spending globally.

In Türkiye, the overall increase was mainly driven by the country’s continuous investments in its domestic arms industry, SIPRI said.

Allocations to the special fund to support the Turkish arms industry rose by 25% year-over-year and accounted for 22% of Türkiye’s total expenditure in 2025, according to the report.

Türkiye has injected billions of dollars over the past two decades to transform it from a nation heavily reliant on equipment from abroad to one that is a major exporter and where homegrown systems now meet almost all of its defense industry needs.

For much of the past two decades, Ankara has expressed frustration over its Western allies’ failure to provide adequate defense systems against missile threats despite Türkiye being a NATO member.

Türkiye’s defense exports sealed a record 2025, rising about 48% year-over-year to more than $10 billion. The goal for 2028 is to lift the full-year figure to $11 billion, placing Türkiye among the world’s top 10 biggest defense exporters, according to officials.

Despite persistent tensions in the Middle East, military expenditure in the region rose only marginally, by 0.1%, to $218 billion, SIPRI said.

In Asia and Oceania, spending reached $681 billion, an 8.5% increase from 2024, the region’s largest annual increase since 2009.

Total military spending in Africa increased by 8.5% in 2025 to reach $58.2 billion, SIPRI said.

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Türkiye says new ‘tax architecture’ to boost competitiveness, investment

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Türkiye outlined details on Monday of a broad package of incentives that top officials say is aimed at boosting competitiveness and attracting investment, and also positioning its biggest city as a leading financial gateway across the region.

Describing the planned reforms as “not an ordinary incentive package,” Treasury and Finance Minister Mehmet Şimşek said the measures amount to a comprehensive “tax architecture.”

“This is a full-spectrum structure covering goods, services, capital, talent and activities. Our priority is to move Türkiye into the top league in terms of global investment attractiveness,” he told a press conference in Ankara.

Şimşek said Türkiye was extending a tax exemption on services exports to 100% to target high-value sectors like software, gaming and medical tourism.

At the same time, it is reducing manufacturing exporters’ corporate tax rate to 9% to boost competitiveness and attract foreign direct investment (FDI), he said.

The tax reductions are long-term and “here to stay,” he told reporters, days after President Recep Tayyip Erdoğan first floated the comprehensive legislative package including the tax plans.

The package aims to increase the ​country’s competitiveness and overall economic appeal, Erdoğan said.

Ankara introduces it at a time when the U.S.-Israeli war with Iran rattles Gulf states, prompting some companies and banks there to consider other options.

Asked about this, Şimşek said the package was not meant to take advantage of war fallout and was in the works long before.

Top government officials attend a press conference, Ankara, Türkiye, April 27, 2026. (AA Photo)

Top government officials attend a press conference, Ankara, Türkiye, April 27, 2026. (AA Photo)

Some of the incentives, including zero corporate income tax on transit trade, are focused on the companies located in the Istanbul Financial Center (IFC), a state-backed clutch of glassy towers on the city’s Asian side.

The rate is 95% for those located outside the IFC, Şimşek said, noting it was set at 50% in years past.

Speaking at the same event, Vice President Cevdet Yılmaz said the package is designed to provide a “clear and reliable framework” for investors seeking stability in an uncertain global environment.

Yılmaz added that companies establishing regional headquarters in Türkiye would benefit from substantial tax exemptions and also said a centralized mechanism would be introduced to accelerate large-scale foreign investments and streamline administrative processes.

The package aims to “export more goods and services, attract more talent, entrepreneurs, capital, a new home that’s more encouraging local citizens to use Türkiye as a center of their activities and… placing IFC as one of the key regional hubs,” Şimşek said.

This month, the IFC’s CEO Ahmet Ihsan Erdem told Reuters that the Iran war prompted dozens of companies with operations in the Gulf to consider moving business there.

The exporter incentives include what Şimşek called a “radical step” toward reducing the corporate tax rate.

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Oil ticks up, stocks mixed as US-Iran peace talks stalled

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Oil prices rose slightly on Monday while stocks were mixed, with the U.S. and Iran no closer to ending their two-month war after President Donald Trump cancelled his envoys’ trip for peace talks over the weekend.

Hopes that the two sides could make progress during negotiations in Pakistan were dashed Saturday by the U.S. president, who said there was no point “sitting around talking about nothing.”

He said on Fox News that he told his team, “We have all the cards. They can call us anytime they want, but you’re not going to be making any more 18-hour flights to sit around talking about nothing.”

However, he told reporters a revised proposal from Iran had followed within minutes of his decision.

“They gave us a paper that should have been better and – interestingly – immediately, when I cancelled it, within 10 minutes, we got a new paper that was much better,” he said, without elaborating.

Asked separately whether the cancellation meant a return to hostilities, Trump said: “No, it doesn’t mean that. We haven’t thought about it yet.”

But even before Trump’s move, prospects for talks were uncertain, with Iranian state television saying Foreign Minister Abbas Araghchi had no plans to meet U.S. officials and that Islamabad would act as a conduit for proposals.

Axios on Sunday cited unnamed sources, including a U.S. official, as saying Tehran had provided a new offer to reopen the Strait of Hormuz – through which a fifth of global oil and gas passes – with nuclear talks pushed back to a later date.

Talks between the rivals have reached an impasse, with Iran hitting out at a U.S. blockade of its ports and the White House demanding that Tehran allow ships to transit the crucial waterway.

Iranian state media said Monday that Araghchi had arrived in Saint Petersburg for talks with Russian President Vladimir Putin. The trip comes after visits to Islamabad and Oman in a flurry of regional diplomacy.

Soon after landing, Araghchi blamed the United States for the failure of the peace talks, citing its “excessive demands,” adding that “safe passage through the Strait of Hormuz is an important global issue.”

Oil prices rose around 2% earlt Monday, though lingering hopes that a deal can eventually be reached have tempered the gains.

However, Fawad Razaqzada of Forex.com, warned they could surge again at any time.

“If tensions were to escalate further, particularly into open conflict, there’s a clear risk of a sharper spike,” he wrote.

“For now, though, as long as shipping through the Strait remains constrained, that premium is unlikely to fade. Until there’s a credible breakthrough, the path of least resistance still looks higher, with a move beyond $110 appearing increasingly plausible.”

Stocks fluctuated, with Tokyo, Seoul, and Taipei sharply up on the back of AI-fuelled tech gains following US giant Intel’s healthy revenue forecasts.

There were also gains in Shanghai, Mumbai, Bangkok and Jakarta, while Hong Kong, Sydney, Singapore and Manila fell.

London fell at the open while Paris and Frankfurt rose.

That came after the S&P 500 and Nasdaq ended Friday at fresh record highs.

Investors were also looking ahead to earnings this week from U.S. tech titans Alphabet, Meta, Microsoft, Amazon and Apple, while the Federal Reserve will hold a closely watched policy meeting at which it is expected to stand pat on interest rates.

Key figures at 07:15 GMT

West Texas Intermediate (WTI): up 1.9% at $96.18 a barrel

Brent North Sea Crude: up 2.1% at $107.51 a barrel

Tokyo – Nikkei 225: up 1.4% at 60,537.36 (close)

Hong Kong – Hang Seng Index: down 0.3% at 25,911.28

Shanghai – Composite: up 0.2% at 4,086.34 (close)

London – FTSE 100: down 0.2% at 10,362.72

Euro/dollar: up at $1.1727 from $1.1717 on Friday

Pound/dollar: up at $1.3537 from $1.3530

Dollar/yen: down at 159.30 yen from 159.42 yen

Euro/pound: up at 86.63 pence from 86.60 pence

New York – Dow Jones: down 0.2% at 49,230.71 (close)

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Turkish economic program needs ‘fine-tuning,’ review: ITO head

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Türkiye’s economic management has created a successful framework and risk management, but the program involves a dynamic process and needs a “fine-tuning” and review, the head of a leading business association said, according to remarks published on Sunday.

“We will not set aside the fight against inflation, but with fine-tuning, we need to review the exchange rate policy, export regime, and import regime within the program. I believe we must design and implement this integrated process very quickly,” said Şekib Avdagiç, the chairperson of the Istanbul Chamber of Commerce (ITO).

Speaking to journalists, Avdagiç said that thanks to the successful work of the economic management over more than three years, Türkiye has moved from a problematic foreign exchange reserve situation to a much more reasonable level, and that an important goal has been achieved in terms of external funding access.

However, he noted that with the developments triggered by the war, it would be appropriate to evaluate the situation from a broader perspective.

“As the business world, we have tried to contribute as much as we can to achieving the targets of the economic program. For this, the business community has also paid a significant cost,” Anadolu Agency (AA) quoted him as saying.

Avdagiç’s remarks on the economic program, which was put in place in the middle of 2023, marking a shift to more conventional macroeconomic policies to curb soaring inflation, come amid some calls to pause the fight against inflation amid the ongoing war in the Middle East.

Earlier this week, Treasury and Finance Minister Mehmet Şimşek sought to dismiss these calls, arguing that sustainable and high growth can only be achieved through low inflation.

“This is a very myopic approach,” he said. “The path to permanent and high growth is through the process of low inflation. If inflation falls, growth will multiply.”

Türkiye’s annual inflation dropped to 30.87% in March from 31.53% in February, compared to the peak of around 85% in October 2022 and around 65% in 2023.

Responding to a question about the central bank’s interest rate decision, Avdagiç went on to say that: “I do not think it would be very correct, realistic, or result-oriented to look at the issue merely as a simple interest rate increase or a decision to keep it unchanged.”

“I believe we are entering a period where economic processes must be reviewed holistically in terms of the sustainability of the business world,” he argued.

“The economic management has created a successful framework and risk management. It is not possible to ignore our gains,” he maintained.

“At this stage, however, we think that, together with the conditions brought by the war and taking into account the expectations of the business world, some updates are needed in the policy that has so far been financial- and reserve-heavy,” he added.

“Of course, the program involves a dynamic process. We will not set aside the fight against inflation, but with a fine-tuning, we need to review the exchange rate policy, export regime, and import regime within the program. I believe we must design and implement this integrated process very quickly.”

The war between the U.S., Israel and Iran, which began two months ago, has led to a notable ascent in global energy prices, while also threatening supply chains of raw materials, including fertilizers, which are used for crops.

The conflict has added pressure on countries relying on imports, but in the face of disruptions, Ankara has touted the success of its diversification strategy and relatively low dependence on Gulf countries for oil and gas supplies.

In response to uncertainties, the Turkish central bank has, in both of its last policy meetings, kept interest rates unchanged at 37%.

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Hoteliers in Turkish capital gear up for upcoming NATO summit

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As Turkish capital Ankara gears up to host the NATO summit, which will take place on July 7-8, the accommodation sector has also begun intensive preparations for the event, according to a report on Sunday.

Ahead of the major event, high-end hotels in the city are accelerating their reservation and operational preparation processes.

During the summit, NATO-standard security protocols will be implemented in hotels for heads of state and senior delegations. The modernization of security systems, the creation of special protocol areas, and staff training form the main pillars of these preparations.

The summit is expected to generate significant added value for Ankara’s economy not only through accommodation but also through logistics, food and beverage, and service sectors. In order to meet the rising demand created by the event, hotels are planning additional recruitment, while placing particular emphasis on training staff in foreign languages and protocol management.

Gökhan Esengil, the chairperson of the regional executive board of the Tourism Hotel Managers Association, told Anadolu Agency (AA) that the process related to the summit is proceeding differently from typical tourism activity.

Explaining that most reservations are made through corporate block bookings rather than individual guests, Esengil said that as the summit dates approach, occupancy rates in our high-end hotels in Ankara has “reached around 90%.”

Also, emphasizing that security measures are being raised to the highest level due to the nature of the event, Esengil elaborated: “In such events, our hotels cease to be mere accommodation facilities and turn into controlled diplomatic areas. At entrances and exits, multi-layered security measures are implemented, and some of our hotels are fully or partially allocated to delegations. Coordination with state security units has reached the highest level.”

Furthermore, noting that Ankara hotels already have experience in hosting bureaucratic guests and therefore provide services with qualified staff, Esengil said that special training programs for the summit are also ongoing.

He added that staff are being trained especially in protocol rules, crisis management, foreign languages, and service standards, and that the use of external service providers is also being increased to support operations.

He also suggested that the economic impact of the summit will not be limited to the accommodation sector.

“Transportation, car rental, restaurants, event companies, and technical service providers will all directly benefit from this activity,” he said.

“The high spending capacity of incoming guests will provide a significant short-term boost to the city’s economy. This summit will strengthen Ankara’s brand value by proving its capacity to host international events.”

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Week ahead: Top central banks to remain wary amid war, energy strains

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A flurry of decisions by major global central banks is expected to mark this week in global markets as policymakers try to navigate rising pressures on domestic economies following the start of the conflict between the U.S., Israel and Iran at the end of February.

The U.S. central bank, the European Central Bank (ECB) and the Bank of England (BoE) are all due to gather at their respective monetary policy meetings this week, with expectations largely tilted to the prospect of all of them remaining wary of risks and keeping rates on hold, and thus restraining from hikes at the moment.

The Federal Reserve (Fed), which meets first, is widely expected to keep interest rates unchanged as energy prices stay high and supply chains disrupted due to war in the Middle East.

The Fed’s two-day meeting, starting Tuesday, could be the last one for Jerome Powell at the helm of the independent institution.

But it takes place against a tricky backdrop.

Powell’s successor has faced a bumpy road to confirmation, while policymakers battle competing pressures as steeper fuel prices drive inflation and job market worries linger.

Fed officials are set to keep rates steady at a range between 3.50% and 3.75%, extending their pause since the start of the year.

“We still have a very high level of uncertainty on what’s happening in the Middle East,” KPMG senior economist Kenneth Kim told Agence France-Presse (AFP).

Oil and gasoline prices remain elevated even if they have peaked, meaning “there’s certainly an energy shock that’s still impacting both consumers and businesses,” he said.

The Fed has a dual mandate of maintaining price stability and low unemployment. It tends to keep interest rates high to curb inflation or lower them to spur growth, meaning that current conditions pull officials in different directions.

Navy Federal Credit Union Chief Economist Heather Long expects Powell to be “non-committal” on the path of rates, as the full impact from the war on Iran remains unknown.

The oil price hikes came after U.S.-Israeli strikes targeting Iran from Feb. 28 sparked Tehran’s retaliation in virtually closing the Strait of Hormuz, a key waterway for energy transit.

Containing inflation

Fed officials will likely focus more on containing inflation than the job market at this meeting, with the war entering its ninth week.

The strait is also a key passage for fertilizers, and disruptions threaten to hit food production.

Already, U.S. consumer inflation reached its highest level in nearly two years in March at 3.3% as energy costs skyrocketed.

Fed Governor Christopher Waller, who earlier backed lower rates to support employment, indicated this month that a prolonged conflict could make it hard for the central bank to cut rates this year.

If there were high inflation and a weak labor market, one would have to balance risks on both sides.

This “may mean maintaining the policy rate at the current target range if the risks to inflation outweigh those to the labor market,” he told an Alabama event.

KPMG’s Kim said solid hiring recently “gives the Fed some cushion” to temporarily focus more on prices. Analysts will monitor if the Fed signals in its post-meeting statement that rate hikes are a possibility.

‘Critical juncture’

The Fed is also taking its next steps under intense political scrutiny.

President Donald Trump has made no secret of his wish for lower interest rates, and regularly slammed Powell for not cutting them aggressively.

Beyond rhetoric, Trump has sought to oust Fed Governor Lisa Cook over claims of mortgage fraud. The Supreme Court is set to rule on whether he can fire her.

Meanwhile, Trump’s choice of new Fed chairperson, Kevin Warsh, has faced a bumpy road to confirmation.

Republican senator Thom Tillis on the Senate Banking Committee vowed to block Fed appointments until a Justice Department probe into the Fed and Powell is resolved, setting up a potential impasse on the panel Warsh needs to clear.

But the Department of Justice (DOJ) said Friday it would drop the investigation linked to renovation costs overruns, potentially paving the way for Warsh’s ascendance.

Asked by journalists on Saturday about the DOJ’s move, Trump said he still wants to look into the cost of the Federal Reserve building renovations, which he has claimed is too high.

“I tell you, I want to find out. I have an obligation to find out,” he said.

Warsh has repeatedly pledged to remain independent if confirmed.

“We’re at a critical juncture for the Fed,” EY-Parthenon chief economist Gregory Daco told AFP.

“It may be that under Warsh, we’re going to see less Fed transparency, less Fed communication than we had in the past,” he said, referring to Warsh’s confirmation hearing testimony.

Powell’s term as chair expires May 15, and he originally intended to stay on the Fed’s board of governors until the probe on him is completed. All eyes will turn on him, and if he shares any plans at his scheduled press briefing on Wednesday.

ECB, BoE likely to hold too

Meanwhile, according to recent polls, both the ECB and BoE, are also expected to keep their policy rates unchanged on Thursday despite risks to inflation in the U.K. and slowing manufacturing in the eurozone.

Bank of England policymakers will “almost certainly” hold interest rates at 3.75% at their meeting, despite the Iran war pushing up the cost of living, economists have said.

However, experts have said a future interest rate increase could still be a possibility if firms and households continue to face inflationary pressures.

The Bank of England’s nine-strong Monetary Policy Committee (MPC) will vote on whether to maintain, increase or decrease its base interest rate on April 30. The bank will also publish its first full monetary policy report and set of economic forecasts since the Middle East conflict began in late February.

This week, a raft of economic data has shown that the conflict has helped to drive inflation higher.

Data published by the Office for National Statistics (ONS) on Wednesday showed that inflation climbed to 3.3% in March, a three-month high, on the back of accelerating fuel prices.

The price of motor fuels jumped by 8.7% month-on-month, marking the largest increase since June 2022, as disruption to oil production and transportation drove diesel and petrol prices higher.

Despite these figures, economists broadly expect the bank’s rate-setters to maintain the current interest rate.

Oxford Economics chief U.K. economist Andrew Goodwin said: “We expect the MPC to keep bank rate unchanged at 3.75%, with most committee members seemingly keen to hold policy at its current restrictive level as they gather more information about how the energy shock is feeding through to the economy.”

The European Central Bank is also expected to hold its deposit rate on April 30 but hike it in June, according to just over half of economists polled by Reuters.

Economists, however, failed to agree on what would follow June’s quarter-point lift, largely seen as an ‌insurance move because the extent of any second-round inflationary effects arising from higher fuel prices was still unclear.

ECB policymakers have sounded more determined than their peers to contain inflation but have played down the likelihood of an immediate rate rise, citing insufficient evidence that energy costs, which they can’t control, are spilling into broader price rises.

The central bank is still haunted by its slow reaction to a rapid inflation surge in 2022, while also wary of repeating its 2011 mistake, when it raised rates twice in four months as commodity prices climbed, making a eurozone debt crisis worse.

The European Central Bank must ‌be cautious when setting interest rates, given the great uncertainty associated with the war in Iran, ECB Vice-President Luis de Guindos said ​on Tuesday.

All but one of 85 economists in the April 17 to 23 Reuters poll predicted the ECB would hold its deposit rate at 2% next week.

Just over half, or 44, forecast a June increase to 2.25%, while 40 expected no change. Until late last month, most economists had expected rates to stay unchanged this year.

“The ECB will try to avoid a repeat of 2011. They need to have some clarity that whenever they hike, they’re not going to have to undo that quickly. And that’s a reason to move in June rather than in April,” Ruben Segura-Cayuela, head of the European economics research at Bank of America, said.

“There’s still a scenario in which the ECB looks through the shock … The risk is the activity will react a bit more negatively than we are expecting. That might create additional incentives to delay hikes. And ‌once you delay hikes, at some point, you might decide not to hike at all.”



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