The European Central Bank is expected to increase its benchmark policy rate by 25 basis points, but all future rate decisions will be data-dependent due to uncertainties over inflation and growth outlook. Recent inflation data shows price dynamics are slowing down, but consumer price rises remain too high, leaving wage pressures increasing. The new staff projections from the ECB due on Thursday will be key. The growth picture has uncertainties attached, with sentiment indicators recovering, but hard data has not. Quantitative tightening is unlikely to be discussed between policymakers this week.
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