Christine Lagarde, President of the European Central Bank, gave decisive messages on the continuation of the interest rate hike. Speaking at the EU Parliament in Brussels, Lagarde said: "We expect to continue with rate hikes in the next few meetings to reduce demand and to counter upside risks in inflation expectations." Lagarde stated that inflation risks are on the upside and future policy decisions will depend on the data.
The ECB had increased interest rates by 75 basis points this month, as the Russia-Ukraine war led to an inflation and energy crisis. However, the continuation of interest rate hikes leads to expectations that the Euro Zone will be dragged into recession. Data released today in Germany, Europe's largest economy, showed that business confidence continued to deteriorate.
ECB officials, on the other hand, are making statements that there will be no return from the interest rate hike, despite the risk of weakening in the economy.
75 basis point rate hike expectation
Ahead of the new record-breaking inflation data to be released on Friday in Europe, traders are pricing in that the Central Bank will continue to raise interest rates by 75 basis points in October. Thus, the deposit interest rate is expected to reach 1.5 percent, the highest level since 2008.
ECB Vice President Luis de Guindos, in a speech he made today, stated that record inflation is the biggest threat to the regional economy and that this situation threatens investments and consumer spending.
The next meeting of the ECB will take place on October 27.