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MNI SOURCES: ECB Weighs 50 In December, Hawks To The Fore

(MNI) London

The ECB would rather see a recession than allow inflation to get out of control, officials say.

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The European Central Bank will consider slowing its pace of hiking to 50 basis points at its December meeting, but while more dovish Governing Council members are increasingly worried about an economic slowdown, hawks are confident they have the numbers to sustain tightening well into the new year, eurosystem sources told MNI.

While 50 basis points was seen by most officials as December’s most likely choice, some said doves might even offer to back a third consecutive 75-basis-point hike on Dec 15, if in return the ECB waits until it has reached its rate cycle peak before beginning to run down its balance sheet via quantitative tightening. With end-of-year eurosystem inflation projections expected to show little sign of a let-up, the Council is likely to favour further increases of 50 or 25 basis points for the following two meetings at least.

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The European Central Bank will consider slowing its pace of hiking to 50 basis points at its December meeting, but while more dovish Governing Council members are increasingly worried about an economic slowdown, hawks are confident they have the numbers to sustain tightening well into the new year, eurosystem sources told MNI.

While 50 basis points was seen by most officials as December’s most likely choice, some said doves might even offer to back a third consecutive 75-basis-point hike on Dec 15, if in return the ECB waits until it has reached its rate cycle peak before beginning to run down its balance sheet via quantitative tightening. With end-of-year eurosystem inflation projections expected to show little sign of a let-up, the Council is likely to favour further increases of 50 or 25 basis points for the following two meetings at least.

Keep reading...Show less