This could be a big hint that the ECB wants to take on inflation head on.
That said the bones of this report are brittle. One of the sources quoted said this:
"I won't necessarily back 75 but there is no reason it shouldn't be discussed"... "If the Fed did it here is no reason why we chould not at least put it on the table."
I mean, are we discussing this for real or playing games?
Another said:
"The outlook is much worse that we projected in June so I agree that 75 bps should at least be discussed."
A third source was more hawkish:
"For me, 50 is the minimum. More data will come in before Sept 8 but as of now I see a strong case for 75."
Yet another pointed to the currency:
"If you don't hike, will energy get cheaper? No. In fact it coudl get more expensive since the euro would likely weaken and energy is denominated in dollars"
That's some emerging-market policymaker-style thinking.
EUR /USD is up to a session high of 1.0072 on this. There's a real philosophical question about the ECB's role in an energy crisis and with a failing economy. The mandate is inflation -only but when the cause of inflation has little to do with ECB policy, does hiking rates help? Trying to pump the currency is a weird argument because it makes Europe more-competitive on many exports as well.
I wrote about this debate yesterday and offered my new favorite meme.
