Energy prices take center stage as the ECB prepares to decide on rates

The article says the European Central Bank is widely expected to raise rates by 25 basis points to 2.25% as policymakers respond to rising inflation pressures from surging energy prices. Euro zone headline inflation climbed to 3.2% in April, with energy prices up 10.9% year on year, while core inflation increased to 2.5%, raising concerns about second-round effects in services and wages. The ECB faces a difficult balance: containing inflation while avoiding pushing the fragile euro zone economy into recession. Markets are pricing in three more rate hikes this year, and investors will focus on updated ECB forecasts for inflation and growth, which are expected to show weaker growth and higher inflation assumptions due to the energy shock.