Interest rates

ECB to raise interest rates by 75 basis points in September, says Goldman Sachs

The Governing Council of the ECB is expected to raise interest rates by 75 basis points at its September meeting, predicts the bank Goldman Sachs. Bank analysts have revised their previous forecasts and expect the final rate to hit 1.75% in February.

“Given today’s stronger-than-expected inflation data, along with hawkish comments and upside risks to near-term growth – we now expect the Governing Council to increase by 75 basis points at the September meeting“, said the American bank in a note on Wednesday.

According to Eurostat data, also released on Wednesday, eurozone inflation hit 9.1% year-on-year in August, surprising analysts at Goldman Sachs. According to them, core inflation in September will be 4.6% YoY and CPI inflation in the fourth quarter will reach around 10% YoY.

Although incoming activity indicators have so far held up slightly better than expected, Goldman Sachs forecasts a “slight” decline in the third quarter of this year. Experts have pointed out that a euro recession is likely as tensions in European gas markets continue.

Goldman Sachs’ latest interest rate forecast was also influenced by hawkish statements from ECB officials. Analysts recalled Isabel Schnabel, a member of the ECB’s executive board, saying the ECB must “act decisively” to “bring inflation back on target quickly.”

The bank’s experts predict a 50bp hike in October and two hikes of 25bp each soon. The final rate should be 1.75%.

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