The European Central Bank is poised to deliver the biggest rate hike since the introduction of the euro as it fights to contain rising inflation.
Economists expect the central bank to raise all three key interest rates by 0.75 percentage points on Thursday, after data showed prices rose a record 9.1 percent in the year to August.
This would be the largest rate hike since the single currency was introduced in 1999.Read:Policymakers to hold emergency meeting on money market jitters
The ECB is also expected to revise its inflation forecasts and cut growth forecasts again, as Russia’s curtailment of gas supplies to the continent threatens to plunge the bloc into a severe recession.
Peter Praet, chief economist at the ECB until 2019, said it was time for the central bank to act strongly.
He said: “I would do 75 basis points. They have to give a strong signal that they mean it. Obviously, with inflation at 9.1 pc, you can’t keep interest rates at zero.”
In addition to its interest rate decision, the ECB will also release quarterly forecasts for growth, jobs and inflation.
It previously predicted that inflation would peak at 7.5 pc, before falling back quickly.Read:Popular play facility announces closure with ‘heavy heart’ due to ‘unprecedented energy costs’
Annual growth in the eurozone is also expected to be revised downwards from a forecast of 2.8 percent this year and 2.1 percent in 2023.Read:SEC Turns the Screws Again With Crypto Market Manipulation Case
Russian state-backed energy company Gazprom said late last week that the main gas pipeline to Europe will not reopen as planned, pushing energy costs to new heights.
Mr Praet said the single currency bloc is losing momentum as it swings towards stagflation.
He said: “The ECB should raise interest rates to give a signal when the economy is in relatively good shape. But then they should also make gentle noises saying that we will reassess the situation meeting by meeting and say that downside risks have increased.”
Others said it would be a mistake to raise interest rates. Robin Brooks, chief economist at the Institute of International Finance, said: “The ECB is far too aggressive. You have countries like Italy with a high debt burden. Those countries can get into trouble.”