ECB could decide a final hike next week

The Governing Council of the European Central Bank (ECB) will convene the following week. Analysts believe that the ECB will carry out one more 25 basis point rate hike.

They claim that the ongoing strong inflation momentum and the anticipated inflation levels above the target are what led to this decision.Economists expect the ECB to deliver a final 25bp rate hike during next week’s ECB meeting due to still too strong inflation momentum and projected inflation above the target.

It is also expected that there will be an advancement of the end to full reinvestment process of PEPP currently guided for Dec24 to be on the cards. Specifically, we expect ECB to ‘task committees’ for an announcement at the October meeting.

The economic outlook has worsened since the July meeting, but the momentum in inflation is yet to show convincing dynamics, and given ECB’s sole inflation mandate, we expect this inflation momentum to prevail.

A compromise in the governing council could be no hike and an acceleration of the balance sheet normalisation, but given the policy rate is the primary tool to calibrate its monetary policy stance, economists expect a rate hike.