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ECB Officials Start to Accept Rate Hikes May Not End in July

  • Inflation worry means September increase is becoming an option

  • There’s no sense of confidence about an imminent pause

European Central Bank officials are starting to accept that interest-rate increases might need to continue in September to bring inflation fully under control, according to people familiar with the debate.

The ECB’s data-dependent approach means any views on what could happen in four months may easily shift. All the same, some policymakers from across the spectrum of the Governing Council are speculating that two further expected quarter-point hikes may not be sufficient to tame consumer prices, said the people, who declined to be identified because such discussions are private.

That would mean a possible third move when officials reconvene on Sept. 14 after their summer break, bringing the deposit rate to 4% from the current level of 3.25%. By then, they’ll have seen two more sets of forecasts, four further inflation readings and another quarterly bank-lending survey.

With the next ECB meeting still more than a month away, no decisions have been taken as policymakers keep open minds on the path of borrowing costs. Equally, there’s no sense of confidence that their tightening cycle is on the verge of a pause.

The euro held gains, trading 0.1% stronger at $1.0972. German government bonds and wagers on ECB rate hikes were little changed, with the market fully pricing in at least one more 25-basis-point increase this year.

Most economists see the ECB reaching a terminal rate of 3.75% in July. Danske Bank is among a small minority forecasting the deposit rate to reach 4% in September.


Alessandra Migliaccio and

Jana Randow

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