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ECB Will Limit Interest-Rate Hikes to This Year Only, HSBC Says - BLOOMBERG
(Bloomberg) -- The European Central Bank will stop hiking interest rates after the end of 2022, when a euro-area recession and easing price pressures will restrain monetary-policy tightening, according to HSBC.
Cuts to Russian natural gas supplies and resulting surges in energy costs will drive inflation higher than previously expected, to a peak of 10% in October, HSBC economists led by Simon Wells said Friday in a report to clients. The squeeze on household incomes will make a recession “probably unavoidable.”
“By the first quarter next year, as the impact of the recession we now forecast becomes increasingly evident and inflation starts to fall, we think the tightening cycle will be over and we no longer expect any rate hikes in 2023,” the analysts said.
The ECB will raise rates by 50 basis points in September -- with a risk of a higher 75 basis-point step -- followed by 25 basis-point increases in October and December, according to the report. HSBC previously predicted hikes through March 2023.
