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MNI SOURCES: Both 75, 50BP Still In Play As ECB Readies Hike​

(MNI) London

Hawks and doves see the ECB taking rates to neutral by the end of the year, but disagree on how to get there.

True

The chances of a 75-basis-point hike at the European Central Bank’s meeting this week have risen, as even more dovish officials recognise the need to take interest rates above 1% by the end of the year to tame inflation, but a smaller 50-bp increase remains on the table, Eurosystem sources told MNI.

While worse-than-expected readings for August inflation and euro depreciation, which pushes up already inflated dollar-based prices of commodity imports, have driven expectations of a bigger increase than July’s 50-bp move, officials confessed that the outcome of this week’s meeting was hard to anticipate, in a very different situation to that in the days of former ECB President Mario Draghi, who was more direct in steering the Governing Council towards what he viewed as the correct path of policy.

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The chances of a 75-basis-point hike at the European Central Bank’s meeting this week have risen, as even more dovish officials recognise the need to take interest rates above 1% by the end of the year to tame inflation, but a smaller 50-bp increase remains on the table, Eurosystem sources told MNI.

While worse-than-expected readings for August inflation and euro depreciation, which pushes up already inflated dollar-based prices of commodity imports, have driven expectations of a bigger increase than July’s 50-bp move, officials confessed that the outcome of this week’s meeting was hard to anticipate, in a very different situation to that in the days of former ECB President Mario Draghi, who was more direct in steering the Governing Council towards what he viewed as the correct path of policy.

Keep reading...Show less