The ECB, which raised rates by 25 basis points, said the new level of constriction will make a “substantial contribution” to bringing inflation under control. New forecasts by ECB staff showed softer economic growth for 2023 through 2025, they also revealed inflation remaining above the 2% target in 2025.

“With the business surveys indicating an imminent sharp slowdown in growth, the ECB are probably done hiking,” said Mike Bell, global liquidity market strategist at JPMorgan Asset Management. “Against the weaker growth backdrop, the ECB can probably pause at the next meeting and if the growth outlook continues to deteriorate a pause could morph into a peak.”

ECB’s Razor-Edge Meeting Rests on Price Outlook: Decision Guide

Equities in the region have had a negative start to September, with this year’s rally pausing on slowing economic growth and high inflation, triggering stagflation fears. The Stoxx Europe Index is 8% higher so far this year.

Among movers, Deliveroo Plc shares rose after Bloomberg reported that activist investor Sachem Head Capital Management has taken a stake and Italian lenders underperformed after Prime Minister Giorgia Meloni said that even if a new windfall tax on banks’ profits is modified, the state will still expect inflows of almost €3 billion ($3.2 billion).

For more on equity markets:

• Blurry Inflation Path Could Make Markets Choppier: Taking Stock
• M&A Watch Europe: Kingspan, Nordic Waterproofing, Deliveroo
• Irish Stock Market Faces Shrinking Pool of Blue Chips: ECM Watch
• US Stock Futures Unchanged; Citigroup, Amazon, Netflix Gain

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