JP Morgan analysts state in their latest note to clients that the European Central Bank (ECB) is likely to carry out another 50 basis point rate hike before pausing.
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“We have no doubt that the ECB, at its next meeting on September 8, will revise its inflation forecasts considerably higher, while it is less likely that there will be sufficient information -without producing a gas rationing shock- to significantly change the growth forecast.”
“In our view, this further upward revision to inflation will not fail to impress the Governing Council, although uncertainty about the growth outlook is likely to be high. Against this background, we take into account our modal view of a mild recession towards the end of the year.”
“Now we expect the ECB to raise 50 basis points in September, instead of doing it in two steps of 25 basis points in September and October. After having brought the official interest rate to 50 basis points in September, we expect the ECB to be somewhat more sensitive to activity data and pause your rate hikes in October, as by then it may be clearer that the eurozone economy is headed for an outright contraction.”
Source: Fx Street
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