ECB raises expectations regarding rate hikes ahead of recession

The European Central Bank's (ECB) warning that sharp rate hikes are not over is raising the stakes about the start of the recession. Tightening monetary policy helps fight inflation, but this could also cause serious damage to the economy.

The current 50 basis point increase was less drastic than the previous 75-point hikes. Despite this, ECB President Christine Lagarde insists that investors should not attach any importance to this fact. According to her, the rate will move several more times. She also admits that a fairly mild economic decline has already begun.

Former ECB chief economist Peter Praet says this statement is very tough. He concluded that the two quarters of mild recession that the European bank predicted could become a full-fledged economic downturn. He suggested that Lagarde came to her conclusion because of a monetary policy mistake. The financial expert also stressed that the European Central Bank underestimates the weakness of the economy.

According to Thomas Gitzel, an economist at VP Bank, rates will end up at around 3.5%. In his opinion, the actions of the ECB are adequate, and the bank does the right thing. He also noted that more is still to come, however, one can put up with any outcome of events.