(Bloomberg) -- The European Central Bank may consider raising interest rates on Thursday by double the quarter-point it outlined just last month because of the worsening inflation backdrop, according to people familiar with the situation.
Such a move would mark a sharp deviation from guidance that the majority of Governing Council members have stuck to since it was laid out at the June 9 policy meeting and would bring the ECB more in line with the global drive for outsized hikes.
As officials lift rates this week for the first time in more than a decade, it’s unclear whether there’ll be sufficient support for a 50 basis-point increase, the people stressed, who asked not to be named discussing private deliberations. Chief Economist Philip Lane will make the official policy proposal at the meeting.
But President Christine Lagarde left space to go beyond 25 basis points in a June 28 speech, days before data showed euro-zone inflation surged more than expected to a new all-time high of 8.6% -- more than four times the 2% target.
“There are clearly conditions in which gradualism would not be appropriate,” she said. “If, for example, we were to see higher inflation threatening to de-anchor inflation expectations, or signs of a more permanent loss of economic potential that limits resource availability, we would need to withdraw accommodation more promptly to stamp out the risk of a self-fulfilling spiral.”