ECB plans to narrow interest rate hike path

Central banks that have signed an aggressive tightening process are reconsidering the interest rate path. While the Fed is signaling that the path will be narrowed following inflation that fell below expectations in the US, it has been stated that the European Central Bank (ECB) is also considering reducing the rate of interest rate hikes. A 50 basis point rate hike is also being discussed in central bank corridors on the other side of the Atlantic. According to sources familiar with the matter who spoke to Bloomberg, the European Central Bank (ECB) is considering reducing the rate of interest rate hikes from 75 basis points to 50 basis points. Sources stated that the view of a 75 basis point rate hike is currently losing momentum in the Governing Council's discussions. The risk of recession, the weakening of the CPI in the near future and approaching neutral interest rates are listed as the reasons for the 50 basis point move. However, if inflation surprises upwards again before the decision to be made on December 15, the needle may turn towards 75 basis points. Hawkish ECB members Joachim Nagel and Robert Holzmann have yet to comment on the size of the December rate hike. ECB members in Estonia and Latvia, where inflation is at its highest, have also commented that increases of 50 and 75 basis points are on the table. French Central Bank Governor Francois Villeroy de Galhau also signaled on Wednesday that the ECB would raise interest rates to a “normalization range” of around 2%, signaling that a 50 basis point move was also possible. “We will probably continue to raise rates. But we will do so more flexibly and probably more slowly. Jumbo rate hikes will not become a new habit,” Villeroy said.