ECB to deliver bumper rate cut in December
ECB set to hike rates at bumper pace, economists say
The European Central Bank is set to deliver a bumper rate hike in December, economists say. The move would come as the bank battles to tame soaring inflation in the eurozone.
Economists at Goldman Sachs, Barclays and Citigroup all predict that the ECB will raise its deposit rate by 75 basis points to 2% in December. This would be the biggest single rate hike by the ECB since it was founded in 1998.
The ECB has already raised rates by a total of 125 basis points this year, but inflation in the eurozone remains stubbornly high.
Inflation in the eurozone hit a record high of 10.7% in October, driven by soaring energy and food prices.
The ECB has a mandate to keep inflation at 2%, so it is under pressure to take aggressive action to bring inflation under control.
A 75 basis point rate hike would be a significant step, but it is unlikely to be enough to bring inflation down to the ECB's target.
Economists say that the ECB may need to raise rates even further in 2023.
"We expect the ECB to continue hiking rates in 2023, but at a more gradual pace," said Silvia Dall'Angelo, senior economist at Federated Hermes.
"We forecast a further 50 basis points of hikes in the first half of next year, taking the deposit rate to 2.5%."
The ECB's rate hike decision will be closely watched by markets.
A 75 basis point hike would be a clear signal that the ECB is serious about tackling inflation.
However, it would also raise concerns about the impact of higher interest rates on economic growth.
The eurozone economy is already slowing, and a sharp rise in interest rates could tip it into recession.
The ECB will need to carefully balance its inflation-fighting mandate with the need to support economic growth.
Conclusion
The ECB is set to deliver a bumper rate hike in December, as it battles to tame soaring inflation in the eurozone.
The move would be the biggest single rate hike by the ECB since it was founded in 1998.
However, it is unlikely to be enough to bring inflation down to the ECB's target of 2%.
Economists say that the ECB may need to raise rates even further in 2023.
The ECB's rate hike decision will be closely watched by markets.
A 75 basis point hike would be a clear signal that the ECB is serious about tackling inflation.
However, it would also raise concerns about the impact of higher interest rates on economic growth.
