ECB rate hike cycle: how will they start?
Despite guidance for a ‘gentle’ start to rate hikes, could economic conditions convince the European Central Bank to tighten monetary policy more aggressively?
- Inflation in Europe had started to rise before Russia’s commodity shock.
- The current weakness of the euro has been another factor that has been driving inflation higher.
- ECB President Lagarde used the word ‘flexibility’ twelve times at their June conference, adding that the Council was prepared to use the flexibility given by their mandate on inflation.
- The political landscape in Europe is likely to be supportive of the ECB taking action to tackle the rising inflation.
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