Analysts at Societe Generale believe that the European Central Bank (ECB) is likely to announce another 75 bps rate hike this Thursday, suggesting more rate increases on the table.

Key quotes

“Expect another 75 bps hike by the ECB in October and more rate hikes through next spring, barring a deeper recession, for a terminal rate of 3% by mid-2023.”

“Faster rate hikes also move quantitative tightening (QT) up the agenda, and we now expect a gradual start by mid-2023. However, with the balance sheet playing an important role for financial stability (see the UK) and avoiding fragmentation, QT options and communication will need to be assessed carefully.”

“Focusing initially on private sector assets, allowing greater capital key flexibility and/or a faster TLTRO reduction could help smooth any market volatility or increased fragmentation.”