Last month, the ECB raised the deposit rate by 50 basis points to zero, which was an unexpectedly big move. It was expected that another similar rate hike could take place at the meeting on September 8, as inflation in the euro zone is now approaching the double-digit level.
Although 75bp is still considered unlikely given the expected opposition from southern politicians, the comments reinforce arguments for a 50bp rate hike and point to hawkish dynamics in the debate.
Although no ECB decision-maker publicly supported such a large move, successive increases by the US Federal Reserve and the persistent deterioration of inflation prospects in the euro zone strengthen the arguments for such a discussion.
Inflation in the zone reached 8.9% last month, more than four times the ECB target.
Reuters sources added that the upcoming recession in the euro zone does not reduce the arguments for a higher rate hikewhich to some extent reflects the recent shift in rhetoric on the other side of the Atlantic at the Fed.
“In my opinion, the most important thing just happened before the weekend, and it wasn’t Fed chairman conference. A controlled leak from the ECB appeared on the market, according to which the September rate hike may amount to 75 basis points. The ECB repeatedly released this type of information, which then proved successful and the market believes it, “Piotr Popławski, senior economist of ING Bank Śląski, told PAP Biznes.
After media reports the euro strengthened against the dollar. According to Popławski, such information may lead to an increase in EUR / USD to around 1.015 and a decline in EUR / PLN to around 4.70.