ECB again eyes jumbo rate hike to ‘tame inflation beast’

FRANKFURT: The European Central Bank is expected to set aside recession worries and deliver another jumbo interest rate hike this week to cool inflation, as Russia’s war on Ukraine sends energy prices soaring.

Inflation in the 19-nation eurozone climbed to an all-time high of nearly 10 percent in September, five times the ECB’s target of two percent.

The ECB’s governing council last month raised its key interest rates by an unprecedented 75 basis points, and many observers expect it to repeat the move at Thursday’s meeting.

Households and businesses are bracing for a grim winter as Russia continues to squeeze gas supplies to Europe, raising fears of energy shortages and eye-wateringly high electricity and heating bills.

The war has also pushed up food costs, while pandemic-era supply chain snarls combined with higher manufacturing costs have added to price pressures on a range of goods.

“Those who thought inflation was dead now know better,” said Joachim Nagel, the head of Germany’s Bundesbank central bank.

“Now the beast has woken up from its slumber... it’s up to monetary policymakers to tame it again,” he recently told students at Harvard University.

Like other central banks, the ECB is using a series of rate hikes to bring inflation under control — at the risk of slowing economic activity to such an extent that it triggers a downturn.