the Council divided in October on the extent of the rate hike

The Governing Council of the European Central Bank (ECB) was not unanimous in October on the extent of the rate hike to decide to bring down inflation, according to the minutes of its last meeting, published on Thursday .

During this meeting, on October 27, the monetary institute decided on a new tightening in order to fight against galloping inflation in the euro zone, by raising its rates by 0.75%, as in September and despite the risk fuel the looming recession.

This decision, supported by a very large majority of the members, was however considered reckless by some around the table, who expressed their preference for an increase (…) of 50 basis points, according to the minutes .

The reason: Too aggressive a pace of tightening could have knock-on effects on financial stability, economic activity and, ultimately, inflation, the paper said.

The Frankfurt institution is under pressure to contain record inflation, fueled by soaring food and energy prices in the wake of Russia’s invasion of Ukraine.

Inflation in the euro zone exceeded 10% in October, almost five times the ECB’s 2% target, which is responding with measures aimed at curbing demand, by making credit more expensive.

These measures will continue, including rate hikes, while a technical recession, ie a decline in activity for two quarters in a row, is looming as the reference scenario in the euro zone, according to the document.

This recession, expected to be shallow, would however be unlikely to contain current inflation, which is showing worrying signs of entrenchment, the members of the ECB Council judged.

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Minutes from the October meeting show some tentative signs that fears of a deeper recession are mounting, at least among some ECB members, notes ING economist Carsten Brzeski.

This note of caution combined with long-term inflation expectations still close to 2% could allow the ECB to move towards at least a pause in its rate hike cycle soon, he adds.

In the United States, more advanced in the monetary tightening cycle, a majority of the members of the Monetary Committee of the Federal Reserve estimated, during a meeting at the beginning of November, that a slowdown in rate hikes would soon be appropriate, according to the minutes of this meeting published on Wednesday.

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