After an almost coordinated hike in interest rates by all the world’s major central banks – and not only them – the first de-escalation of inflation is recorded, as the prices of key commodities such as oil, grain and copper have fallen in recent weeks. Central banks, however, will continue their move towards restrictive policies, just as and perhaps more aggressively than they have been moving so far, at least as far as the ECB is concerned. Their intentions were clear at the Federal Reserve’s annual meeting, while leaks from ECB sources suggest the eurozone bank has not completely ruled out an aggressive 75 basis point rate hike at the September meeting.

JPMorgan Chase analysts estimate that global inflation will fall to 5.1% in the second half of the year. However, the same analysts note that this de-escalation does not mean a return to the low levels of price growth that prevailed for years before the twin shocks of the pandemic and the war in Ukraine. Rents will continue to rise, as will the cost of labor-intensive services, and all indications are that the Federal Reserve, the ECB and the Bank of England will raise interest rates at their September meetings. Already at the Jackson Hole conference, Jerome Powell left open the possibility of another aggressive 75bp uptrend.

Speaking on behalf of the ECB, Isabelle Schnabel stressed that the bank “does not have many alternatives” other than to keep raising interest rates even if the eurozone slides into recession, as it already seems. She even urged her colleagues to “make it clear that they are determined to quickly return inflation to the target level.”

According to JPMorgan Chase, global inflation will fall to 5.1% in the second half of the year.

The usual ECB doves, Giannis Sturnaras and Philip Lane, will have a chance to present their arguments within a week. The numbers are staggering, however, as inflation in the eurozone is already estimated to have reached 9%, more than four times the 2% target.

Thus, after a sharp increase by 50 m.w. which the bank decided in July, within the framework of the Board of Directors. there is a significant minority of members who are asking for consideration of a 75 bp rate hike. Among them are the Austrian Robert Holtzmann, the Dutchman Klaas Nott and the Latvian Martins Kazaks, who determine the increase of 50 m.p. as the minimum required. However, none of these executives said they would apply strong pressure for such a large increase in borrowing costs, as they all emphasize that the macroeconomic data that will be presented at the meeting will be decisive.

In the meantime, although most analysts believe that the ECB’s actions will not significantly affect the euro, investors are feverishly increasing bets on a further fall in the single currency. Betting on a further fall in the euro, known as short selling, is at its highest level since the start of the pandemic, according to a related Financial Times report, as the eurozone is threatened by an energy crisis, high inflation and the prospect of a harsh winter when the Nordic countries are left without Russian natural gas. The British newspaper reports that in the week ended August 23, the number of eligible contracts reached 44,100, up from 42,800 a week earlier. The newspaper emphasizes that in the coming weeks, much will depend on what exactly will happen with the Nord Stream 1 gas pipeline, whether and in what volume gas will be supplied to Europe and how prices for it will be formed. Despite massive selling, the euro rebounded to $1 yesterday, gaining 0.42%, although the Fed chairman’s pledge to keep raising interest rates pushed the dollar to 20-year highs against a basket of currencies.