ECB’s DeMarco backs October hike as core inflation stays firm

Alexander DeMarco, the Governor of the Central Bank of Malta and member of the Governing Council of the European Central Bank (ECB), crossed the wires on Tuesday, saying that “stronger core inflation” could be a reason for the central bank to act, saying that he supports a rate hike in October.

In the September 10 meeting, the ECB decided to lift rates in the three key ECB interest rate facilities by 25 basis points, mentioning that the “Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.”

As of writing, money markets have priced in a 57% chance that the ECB will hold rates unchanged at the October 29 meeting, while the odds of a December rate hike are 84%, according to Prime Terminal.

Key highlights:

Stronger core inflation could be grounds to act

I would not exclude a rate hike in October

Recent rise in L-T bond yields quite worrying

The economic situation is quite fragile.