Inflation has slowed sharply from double-digit readings late last year but remains far too high, making another rate hike a necessity and leaving only its size up for debate, with ECB policymakers split between a 25 and a 50 basis point move.
But the focus in recent months has been squarely on underlying or core inflation, a surprising rise in which has suggested that price pressures are mounting and that the ECB lacks a firm understanding of where inflation could be heading. In a hopeful development for the ECB, processed food, alcohol and tobacco inflation slowed a full percentage point to 14.7%, suggesting that a long-awaited turnaround in food prices may now be happening.pointed to an exceptionally large drop in credit demand amid tighter lending criteria, adding to the case for a smaller rate hike.
Nearly all 26 members of the Governing Council appear to agree that more policy tightening is required after a record 350 basis points of rate increases since July.