ECB Set for Third Interest Rate Hike as Energy Pressures Mount

The European Central Bank (ECB) may be headed for a third interest rate hike in December, according to JPMorgan's latest forecast. The bank now expects the policy rate to reach 2.75%, up from the current 2% level.

Economist Greg Fuzesi attributed this increase to various factors, including persistent energy price pressures, solid economic growth, and sticky core inflation. He noted that growth has surprised to the upside, reducing the risk of hiking rates for the ECB.

Fuzesi also pointed out that core inflation has not moderated as much as expected, reflecting factors such as tech prices and effective wage growth. This shift in approach may lead to a more hawkish stance from the ECB, with at least two Governing Council members signaling a potential increase in the neutral rate estimate.