The European Central Bank (ECB) sees growing risks to raising interest rates to 2% or more to curb soaring inflation despite the possibility of a recession.
Quoting sources who told Reuters, many policymakers see the possibility that they will have to bring interest rates into 'restrictive territory', or in other words, a level of increase that causes the economy to slow.
The source, who spoke on condition of anonymity because policy discussions are closed, said that would most likely happen if the ECB's first inflation forecast for 2025, to be released in December, remains above 2%.
For now, the central bank projects inflation at 2.3% in 2024, although there are expectations that it will be closer to 2% after taking into account the latest gas prices.
The source added that policymakers are bracing for a recession this winter and weaker economic growth next year despite the ECB's official forecast for an expansion of 0.9%.
The ECB's current interest rate is currently at 0.75% after it increased rates by 75 basis points last week.
President Christine Lagarde hinted at two or three more hikes, saying rates were still far from levels that would bring inflation back to target.
