Goldman forecasts ECB rate hike of 75 basis points during the upcoming meetings

The European Central Bank is expected to announce a 75-basis-point rate surge at its next sessions scheduled for October and December, as Goldman Sachs Group Inc. says. 

Bank economists headed by Jari Stehn had previously noted a more moderate 50 basis-point rate hike during the ECB's previous meeting, stating, "we consider higher inflation in the fourth quarter would hinder the process of lowering rate hikes.”

As a consequence, Goldman Sachs is talking about a prospective rate hike of 50 basis points in February, doubling its previous forecast. According to the analysts, maintaining a restrictive monetary policy, as well as stabilizing inflation points to a recession in the eurozone economy. "Thus, our updated forecast indicates a hike in the terminal rate to 2.75%, putting policy into limitative territory."

The ECB has already surged borrowing costs by 125 basis points during its previous sessions, with the recent 75-basis-point increase being an all-time high. The question is how to move forward, as rising prices are followed by ever-expanding recession forecasts. Money market investors expect the ECB to conduct another three-quarter point rate hike in October. Meanwhile, the deposit rate, which is currently at 0.75%, is likely to exceed 2% by the year-end.