European Central Bank officials expect further interest rate hikes to fight persistent inflation, with another move possible as soon as next month, Bloomberg News reported. People familiar with the discussions told Bloomberg that market bets on three additional hikes may go too far, pointing instead to December as a more likely date.
ECB officials expect to raise interest rates further to contain inflation that remains stuck above 3%, and another hike is possible as soon as next month, Bloomberg News reported, citing people familiar with the situation. Policymakers stress their decisions will keep hinging on incoming economic data. An ECB spokesperson declined to comment on the discussions.
December seen as more likely timing
The sources told Bloomberg that aggressive market wagers for three additional hikes may go too far. Instead, December could prove a more appropriate time for the next rate hike, alongside fresh forecasts extending into 2029.
The discussions come after the central bank delivered its second rate increase since the outbreak of war in Iran. Central bankers are attempting to contain severe energy disruptions that have driven consumer prices to three-year highs.
Markets price 75 basis points of tightening
Spurred by surging crude prices and higher central bank projections for growth and inflation, financial markets have priced in a total of 75 basis points of tightening by mid-2027. ECB President Christine Lagarde brushed off short-term market fluctuations, emphasizing that the bank remains focused on ensuring price stability.
Lagarde cautioned that rising energy expenses will eventually spill over into core consumer categories and food prices. Pointing to escalations in the Middle East alongside the war in Ukraine, she warned that elevated energy costs will likely keep headline inflation above the bank's official target into early 2027.
Source: Investing.com
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