| European Central Bank policymakers made the case for a large interest rate hike next month as inflation remains uncomfortably high and the public may be losing trust in the bank’s inflation-fighting credentials.
“Both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high,” Schnabel said. “In this environment, central banks need to act forcefully.” “Front-loading rate hikes is a reasonable policy choice,” Kazaks, told Reuters. “We should be open to discussing both 50 and 75 basis points as possible moves. From the current perspective, it should at least be 50.”With rates at zero, the ECB is stimulating the economy and remains far from the neutral rate, which is estimated by economists to be around 1.5 per cent.
“In my view, we could be there before the end of the year, after another significant step in September,” Villeroy said.