FRANKFURT, Germany — The European Central Bank is expected to frontload a series of rate hikes and sacrifice growth in the region due to the rising cost of living which is threatening to surge even higher.
ECB Executive Board Member Isabel Schnabel’s speech in Jackson Hole set the tone for the upcoming policy meeting this week. With inflation in the euro zone projected to rise to at least 10% in the coming months and the risk of consumer prices rocketing higher, a “jumbo” rate hike of 75 basis points on Thursday is certainly a possibility.
“As frontloaded hikes can have a bigger impact on inflation expectations than a more gradual approach, a 75bp move could make sense,” said ECB watcher and Berenberg’s Chief Economist Holger Schmieding in a research note.
“Although it is largely priced in, it could still exacerbate strains in the bond markets.”