ECB: Inflation “continued to justify the rate hike in October”

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FRANKFURT (Reuters) – Members of the Governing Council of the European Central Bank (ECB) ruled last month that the risk of inflation anchoring warranted further interest rate hikes beyond the level corresponding to a “normalization” of monetary policy, shows the minutes of the meeting published Thursday.

The ECB raised its three key rates by three quarters of a point on October 27 in an attempt to curb inflation. In total, its rates have increased by 200 basis points since July, an increase of unprecedented speed in the history of the institution.

On this occasion, the Governing Council also placed on its agenda the formal opening of the debate on the reduction of the central bank’s balance sheet.

“It was also clear that rates would need to be raised further to a level that would meet the ECB’s 2% target over the medium term,” the minutes said in reference to its inflation target.

“The view that monetary tightening is likely to continue once the stage is reached at which monetary policy is normalized and returned to broadly neutral territory was expressed,” the document added.

Markets are currently pricing in a 50 basis point hike in December, with several Board members judging in recent days that a slower pace of rate hikes would be appropriate.

To reassure the most “hawkish” members of its decision-making bodies, the ECB could therefore launch the reduction of the portfolio of 3,300 billion euros of bonds that it has built up as part of its asset purchase program. APP.

(Report Balazs Koranyi, French version Marc Angrand, edited by Sophie Louet)

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