SJF Bank sees 50% chance of ECB rate hike in December
TLT•SJF Bank puts the chance of a December ECB rate increase at 50%, compared with markets’ roughly 90%. Euro-area inflation rose to 4% in October, driven almost entirely by energy, while core inflation held at 2.5%.
1. Rate outlook
SJF Bank’s November 4 analysis puts the probability of a December ECB rate increase at 50%, versus roughly 90% in markets. Chief economist Jes Asmussen forecasts that an increase would likely be the cycle’s last, citing limited economic resilience.
2. Inflation and demand
Euro-area inflation rose to 4% in October from 3.8%, a three-year high and double the ECB’s target. Energy drove almost all the increase, while core inflation remained at 2.5%, showing no evidence of broader price pressures. Further energy price increases remain a risk, while tighter credit conditions and higher bond yields are restraining demand.
