After raising interest rates for the first time in over a decade at their last meeting, European Central Bank policymakers are poised to deliver another bumper hike on Thursday in a show of determination to tame soaring inflation.
Steep increases in the price of energy in the wake of the Russian invasion of Ukraine have heaped pressure on households and sent the pace of consumer price rises to new highs.
Eurozone inflation hit 9.1 percent in August, a record in the history of the single currency and well above the two-percent rate targeted by the ECB. The "only question" for the ECB's meeting was "whether it will be a 50 or 75 basis point hike," said Carsten Brzeski, head of macro at the ING bank.
Speaking at the annual Jackson Hole central banking symposium at the end of August, ECB board member Isabel Schnabel said the ECB needed to show "determination" to tame price rises.
Under this approach, the central bank would respond "more forcefully to the current bout of inflation, even at the risk of lower growth and higher unemployment", she said.
- 'Only question' -
The ECB's 25-member governing council surprised with a 50-basis-point hike at its last meeting in July, bringing an end to eight years of negative interest rates in one fell swoop.
In her speech in the United States, Schnabel stressed the need for the people to "trust" that the ECB will restore their purchasing power.
The Frankfurt-based institution is already playing catch up with other central banks in the US and Britain that started raising rates harder and faster in response to inflation.
So-called forward guidance issued by the ECB, which limited its scope for action, has been ditched. Policymakers would now take their decisions "meeting-by-meeting", the ECB President Christine Lagarde announced in July. With that, the door has been opened for the ECB to follow in the footsteps of the US Federal Reserve and raise rates by a 75 basis points.
Following August's red-hot inflation numbers, the influential head of the German central bank, Joachim Nagel, said the ECB needed a "strong rise in interest rates in September".