ING: ECB’s inflation woes could prompt further rate hikes

ING economist Peter Vanden Houte said in a note that it is too early to rule out the possibility that the ECB will raise interest rates further to 4%.

The core inflation rate in the euro area remained at 5.5% in July. Since the base effect distorts the annual data, changes in the monthly rate of inflation are more important.

While headline inflation has fallen fairly quickly, it remains above the ECB’s 2% target, while core inflation appears set to remain elevated due to services sector inflation.

If the central bank is focused on month-to-month developments, it may still choose to extend the rate hike cycle.