The probability of the European Central Bank returning to 75 basis point interest rate hikes is now classified as very low. This statement was immediately conveyed by ECB Governing Council member Mario Centeno, pointing out the risk of overreacting to inflation.

The ECB eased the pace of its interest rate hikes on Thursday and increased its key rate by 50 bp to 2%. On the other hand, the ECB still stresses that significant tightening remains ahead. The ECB said they would range estimates to a neutral rate between 1.75% and 2%.

"Returning to the 75 bp rise is an event with a very low probability. The reason is that there is a very obvious approximation to the neutral rate. Apart from that, the maturity that the monetary policy already has is one of the factors," said Mario Centano.

He added, "There are more and more people who need to be cautious as we advance. In February, there is likely to be another 50 basis point rate hike," He said the range of estimates pointed to a neutral rate, a little above 2% but not much above."

Euro Zone Consumer Inflation in November Data and More ECB Policy Projections

This was shown by the EU statistics office Eurostat which said this Friday that the harmonized data must exist. This party also released a table that included the core rate of inflation recommended by the ECB but excluded the explosive energy and unprocessed food costs.

From these data, it is shown that price growth remains above its 2% target throughout a projection horizon which now extends to 2025. The ECB also raised its inflation projections for the Euro Zone. 

They persistently underestimated inflation over the past two years with price pressure. Initially driven by the post-COVID supply chain, inflation has been surging on sky-high energy prices. 

Food and service costs are now becoming increasingly prominent, making the price growth relatively broad, but there will be an impact of high energy prices. Economic growth will suffer badly next year due to Russia's war in Ukraine, particularly the impact of high energy prices. 

The following are the ECB's quarterly growth and inflation projections through 2025. Until now, the ECB has maintained its inflation target at 2%. As investors proceeded with the raft of central decisions, European markets were down Friday. 

The European Central Bank also moved its key interest rate from 1.5% to 2%. It would start to shrink its balance sheet to around 15 billion euros per month from March 2023 to the end of the 2nd quarter of the year.

ECB Knot Says Fed is Closer to End of Rate Hikes than ECB, but Now Will Hike at Least Three Times in a Row

European markets are now lower as investors digest central bank announcements covering travel, financial services, oil, and gas. Meanwhile, the proposal was for 50 bp, which reached a broad consensus. 

Hawkish communication with projections remains unchanged over wage issues. Quantitative tightening did not compensate for itself. The instruments point in the same direction in terms of monetary policy tightening, which is very important to further pipeline pressure. 

ECB's staff projections incorporate market expectations, allowing a return to the target. The ECB said it would have a long way to go in raising interest rates than the Federal Reserve.

ECB governing council member Klass Knot also said that the FED is more likely to end the rate hike. The main reason is that the job market in the EU is overheating.

The European market is now in a manageable position. However, the central bank's tendency to raise interest rates is the counterpart to the country's economy. Therefore, the ECB is considered far from completing rate hikes, still three sessions in a row.