Frontloading the Road to Follow for ECB: BNP Economist

The ECB is now considering a 50 basis points rate hike, surprising many who expected 25 basis points. This decision reflects the serious inflation issues in Europe and aligns with strategies like front loading, previously adopted by the Federal Reserve and Canadian Central Bank. The concept of reverse optionality is discussed, where doing more now allows for less action later. Market expectations are shifting towards more aggressive rate hikes, with potential impacts on inflation expectations and pricing strategies.

What implications does the ECB's decision have for future monetary policy?

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What concerns are raised regarding inflation expectations?

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