The guardians of the euro no longer have many moods: they want to continue to tighten the conditions for access to credit "in order to curb demand", warned Christine Lagarde, President of the ECB, at the end of September.

Their priority is not to let "set in", according to Ms. Lagarde, the rise in prices which reached 9.9% over one year in September in the euro zone, far from the 2.0% that the monetary institute is targeted.

The ECB has already raised its key rates twice since the summer, ending a decade of generous monetary policy: after a 0.50 point hike in July, the pace accelerated to 0.75 points in September , not without sparking internal debates.

For the meeting of the Board of Governors on Thursday, the cause seems heard: a new jump of 0.75 points is expected by economists.

The rate on bank deposits at the ECB, which is one of the three key rates and which refers, is currently at 0.75% and would thus approach a level of 2%, which is more or less considered as neutral for the activity.

Tame "the beast"

The ECB remains "very determined" in the face of inflation and has "closed its eyes to the risk of recession", which it considers more and more inevitable in 2023, estimates Carsten Brzeski, economist at ING.

Inflation tends to generalize, like a "beast (which) has awakened from its sleep" after a decade of lethargy, summed up the head of the Federal Bank of Germany Joachim Nagel, in front of Harvard students.

We must therefore "tame it" by acting quickly and strongly on rates, hammered this emblematic figure of "hawks", supporters of a restrictive monetary policy.

Their word now prevails in the Governing Council of the ECB, where no one thinks that the current economic slowdown, in the context of the war in Ukraine, will in itself be sufficient to curb the surge in prices.

The Frankfurt Institute seems to model its action on the US Federal Reserve, which could again raise its key rate by 0.75 percentage point in November, as at the three previous meetings, according to economists.

But in the United States, inflation is fueled by household spending helped by Washington during the pandemic, while in the euro zone it is the prices of energy and imported raw materials that are driving up the aggregate.

Gas in particular is much more expensive for Europeans since Russia shut down the Nord Stream gas pipeline.

The lull in prices is not in sight: in Germany, industrial production costs jumped by more than 45% year on year in September, with an expected repercussion on the prices of finished products.

French President Emmanuel Macron has recently expressed concern over a monetary policy aimed at "breaking up demand" to contain inflation.

But Berlin has made its difference heard: governments in the euro zone must avoid fueling inflation by supporting demand, objected German Finance Minister Christian Lindner.

- Excess cash -

Launched into a cycle of rapid rate hikes, the ECB could be tempted to act on other instruments.

There thus remains 2.100 billion of outstanding giant and cheap loans (TLTRO) once granted to banks to encourage them to lend to the economy.

It now brings them big profits when that cash is placed with the ECB, which could indicate on Thursday how it intends to end the martingale.

Officials of the monetary institution also plead for the fight against inflation to go through a reduction in the balance sheet of the ECB, inflated by years of massive purchases of public and private debt.

This "quantitative tightening" policy will not take place before the first months of 2023, analysts believe, given the risk of shaking up the financial markets in an already very volatile context.

© 2022 AFP