At the meeting of 20-21 July in Frankfurt, the members of the ECB Governing Council seemed increasingly concerned about the risk of inflation entrenching at high levels, a risk that led the governors to anticipate the times of the squeeze with a rise in rates of 50bps instead of 25.
This was revealed by the minutes of that meeting in which we read that in the discussion among the members of the board “it was noted that there were growing signs of a slowdown in economic activities in the euro area that could extend to 2023”.
The SME surveys – reveal the minutes – show a loss of speed in production both in manufacturing and in services.
As for manufacturing, the index had fallen into negative territory “for the first time since mid-2020”.
In the next meeting on 8 September in Frankfurt, the ECB is expected to see a new rise which, according to forecasts, will still be 50 bps given the new flare-ups in inflation which is approaching double digits.
It should be noted that according to the minutes, some governors in July had expressed themselves for a 25 basis point increase as pre-announced a month earlier in the Amsterdam meeting, but the majority of governors considered it urgent to tackle the danger of inflation with greater decision.