The European Central Bank (ECB) might find itself in a state of hesitancy in combating inflation, but the real interest rates indicate that a complete halt to tightening policies remains out of reach.
In gauging the degree of economic constraint posed by ECB policy rates, market-set inflation-adjusted rates offer the most direct insight.
For instance, Germany’s inflation-adjusted rates only marginally hover in positive territory, presenting a stark contrast to the notably positive rates in the United States.
This Thursday, Eurozone inflation data for August will be released, with economists predicting that the core inflation rate will decline from 5.5% to 5.3%. However, even an outcome in line with expectations might not bring solace to the ECB.
If Thursday’s data shows that inflation is here to stay, both real interest rates and German bond yields could experience a slight uptick.
