After their July meeting, ECB officials suggested they were undecided about raising rates again in September.
Since then, however, there has a been a spate of data suggesting that inflation is anything but under control. So, will they hike again on Sept. 14?
For starters, as of July, eurozone core inflation remains stubbornly elevated at 5.5% year-on-year, 125bps above the ECB’s main refinancing rate. Spain’s core inflation rate for August, the first number to come out for the most recent month, unexpectedly ticked higher to 6.1%. Meanwhile, German wages are rising at over 6.5% per year amid very slow productivity growth.
That said, other data points to a slowdown in growth. The Purchasing Managers Index shows that many sectors across the continent, including German manufacturing, are contracting. The ECB has a delicate balancing act, potentially raising rates to quell inflation while avoiding a painful economic downturn.
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