ECB to hike 75 bps as inflation has not yet peaked, first response to be a stronger EUR – Nordea

The inflation rate in the eurozone rose further in August from 8.9% to 9.1%. Economists at Nordea now expect the European Central Bank (ECB) to hike by 75 bps next week – even if new staff projections for growth are approaching the downside scenario – lifting the euro.

ECB likely to deliver 75 bps in Sep

“Inflation remained almost unchanged at high levels in Aug, but will rise in the coming months as gas prices pass through.”

“ECB to deliver 75 bps in Sep. Risk of 75 bps again in Oct.”

“ECB’s staff projections nearing downside risk scenario, but no recession likely in forecast.”

“Given that a 75 bps rate hike is not fully in prices in financial markets and that the tone of the press conference is likely to be hawkish, we expect the first response in financial markets to be a higher rates, wider bond spreads and a stronger EUR.”