Goldman Sachs analysts said the firm now expects the ECB to raise interest rates in September 75 bp.
These comments come from Inflation data for the Eurozone , “Surprisingly upside.”
“First , today’s inflation data rose further, with headline HICP climbing to 9.1% y/y and importantly, core HICP rising to 4.3% in another strong consecutive monthly print. We expect inflationary pressures to rise further in the coming months as 9 – Germany’s euro fare ends, high energy prices impact retail prices, core inflation peaked at 4.6% in September, with headline inflation approaching 10% in Q4,” explained Said
Analysts acknowledged that new activity indicators have performed better than expected so far, and they see upside risks to forecasts of a slight contraction in the third quarter. However, Goldman Sachs remains comfortable with their forecast for a euro zone recession, given the continued tightness in European gas markets, “but expects a mild recession.”
They also noted that the ECB’s recent comments were hawkish , because they see another reason for the 75 bp hike.
“Given today’s stronger-than-expected inflation data – coupled with hawkish comments and close upside risks – long-term growth – we now expect the Governing Council to raise rates at its September meeting 75bp and raised our forecast for terminal rates to 1.% February2023,” analysts concluded.