The acceleration of Germany's inflation rate in August is likely to further heat up internal debate in the ECB over next interest rate increases. It is very clear that hardly any current central banker has seen inflation rates as high as they are now in his or her professional life. The ECB looks focused mainly in bringing down inflation back to the target instead of aiming at longer-term inflation developments and expectations, a difficult task as price growth looks mainly driven by supply-side frictions. The ECB is under enormous pressure to act, and we expect the central bank to hike by another 50 basis points next week. Even with a looming recession, it currently looks as if the ECB is willing to hike even further. - ING
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