ECB Faces Third Interest Rate Hike as Energy Prices Remain Elevated

JPMorgan now expects the European Central Bank (ECB) to raise interest rates for a third time in December, taking the policy rate to 2.75%, according to economist Greg Fuzesi.

This decision reflects an interaction between more persistent energy price pressures, solid growth, sticky core inflation, and a neutral rate that the ECB sees edging higher.

Fuzesi pointed out that the odds of a durable de-escalation by December have 'progressively receded', which means European prices are likely to stay elevated through winter.

The ECB's Governing Council has been tracking the Middle East conflict closely, turning less hawkish whenever the crisis appeared to de-escalate and more hawkish when it didn't.