European Central Bank expected to slow pace of rate hikes

FRANKFURT, Germany (AP) — The European Central Bank is expected to slow the fast and furious pace of its interest rate increases aimed at fighting inflation — but not by much as high energy prices driven by Russia's invasion of Ukraine ravage consumer finances and threaten a recession in Europe.

Analysts foresee a still-sizable rate hike of a half-percentage point at Thursday's meeting in Frankfurt, Germany, following record increases of three-quarters of a point in July and October. That would echo the U.S. Federal Reserve, which made a half-point increase Wednesday, following four straight hikes of three-quarters of a point.

The Swiss central bank also raised by a half-point Thursday, when a similar hike is expected from the Bank of England. Inflation has eased in the United Kingdom, U.S. and Europe but is still painful as food, energy and housing costs squeeze households.

The ECB will consider how inflation in the 19 countries that use the euro currency unexpectedly fell to 10% last month from 10.6% in October. It was the first drop since June 2021 but still far above the ECB's goal of 2%.

Despite the decrease, it's “too early” to say inflation has peaked, the ECB's chief economist, Philip Lane, said in an interview with the Milano Finanza newspaper.

"I would be reasonably confident in saying that we are close to a peak in inflation,” he said, but cautioned that the journey back to 2% “will take time.”

Bank President Christine Lagarde is expected to stick to a strong anti-inflation message during a news conference after the decision, with a three-quarter-point rate increase not absolutely ruled out. Analysts say rate hikes are likely to continue into next year, and Lagarde's remarks will be watched for hints on how high rates might go.

Analysts at Pictet Wealth...