After hawkish comments from European Central Bank (ECB) policymakers during the week, analysts at Danske Bank now expected the central bank to raise key interest rates by 75 basis points at next week’s meeting.
“We now expect ECB to hike 75bp next week, which will be followed by 50bp in October and 25bp in December, but acknowledge the increased uncertainty on the two latter hike size expectations. This is +25bp for our previous rate hike expectations at both the September and the October meetings, respectively, and we now see the endpoint of the ECB deposit rate at 1.5%.”
“We believe the euro area will face a recession and ECB will hike into that, however, we also acknowledge that even without the ECB tightening, the European economy was in a severe situation to begin with a worsening energy crisis.”
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