The European Central Bank (ECB) Governing Council decided to raise its key interest rates by 75 basis points. How long will it stay on course? Further significant rate hikes in the pipeline but at some point the ECB will buckle because of the recession, economists at Commerzbank report.

This is not enough to bring inflation down to 2%

“The ECB sent a clear signal today by raising the key interest rate by 75 basis points. It held out the prospect of further interest rate hikes because of high inflation.”

“We continue to expect it to raise its deposit rate to 1.75% by the beginning of next year, but to pause the rate hike process after that because of the recession that will then be visible. However, to bring inflation back to 2%, we believe it would have to raise its deposit rate to around 4%.”