We see the following members to support a 75bp rate hike next week based on comments or economic assessment voiced in recent days: Schnabel, Knot, Vasle, Holzmann, Kazaks, Muller, Nagel.
Can be āpersuadedā of 75bp: Villeroy, Rehn. Like to favour a 50bp: Stournaras, Panetta and Visco. Looking ahead, we expect next weekās 75bp will be communicated with a clear guidance of 75bp should not be taken as the going rate hike size. With the gloomy growth outlook, we expect a 50bp in October and 25bp in December, where some discussions on QT (APP reinvestments) may also take place. The deposit rate is seen at 1.5% by year-end. For 2023, we remain open for further hikes. We expect that growth will be revised slightly higher for this year given the upside surprise to the Q2 release. In terms of inflation, we see notably the 2022 revisions almost 2pp higher, and looking into 2023, we expect around 1pp higher headline and as importantly, supporting our case for a 75bp rate is that the inflation is seen above the 2% mark in 2024.
If the ECB only delivers 50bp, we believe markets will read this as the ECB is not committed to fight inflation and lead to a significant steepening of the curves, with notably the 5y to 10y area underperforming. - Danske Bank
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