It was a startling and dramatic moment when, in July, the European Central Bank raised interest rates for the first time in 11 years.
Not the timing of the rate rise – the bank’s president, Christine Lagarde, had primed markets for an increase back in June – even though it was an event on which few would have bet at the beginning of the year.
No, it was the extent of the increase, which took the ECB’s main policy rate from -0.5%, where it had stood since September 2019, back to zero. It was a bigger rise than most economists and market participants had been expecting.
Markets look less likely to be caught out again when, on Thursday, the ECB’s main policy-making body, the Governing Council, meets again.
A rise taking the ECB’s main policy rate to 0.75%, only the second time in its history that it has raised interest rates by three-quarters of 1%, is now being priced in by investors. Another half-point rise, as in July, is…