European Central Bank policymaker Isabel Schnabel said that she sees little risk of raising borrowing costs too far. This is because the interest rate is still meager, so there needs to be something adjusted for inflation and even a recession.

"The danger of overreacting continues to be limited. Real interest rates are still meager," Schnabel told the German newspaper. In this condition, it is also related to the statement from the vice president of the European Central Bank, who said that this is about a period.

He meant that the European Central Bank could raise the interest rate at its current pace to curb inflation at any time. Indeed, inflation has always been a unique threat to the ECB, so the right basis point will help save the European economy.

The ECB last week also said that it would ease the pace and no longer try to underestimate the market. Fiscal policy must be tested because the impact on inflation is unpredictable. Laying out these statements, what the ECB will try is still a question mark.

The ECB Must See little Risk of Overreaction to Inflation and Increase the Interest Rate at the Current Pace

"We have no choice but to act. Investments of 50 basis points may become the new norm shortly. If we do nothing, the situation will worsen because inflation is one of the factors behind the current recession," said Luis de Guindos, Vice President of ECB.

The steps taken by the ECB are now considered to have exceeded the impact on inflation. But what remains is to do more. De Guindos also said that the market has a financial system that is dodged to fight against inflation too.

Currently, the bank has a solid capital position and can withstand a shock. Adding that, he had more doubts about the non-banks. So it is stated that liquid assets can accumulate risky investments, and the fiscal policy will also be adjusted according to the monetary policy.

In this regard, the central bank will hunt the fourth straight time raised rate. Investors are now also starting to be concerned with their assets which have begun to fall by 2.75% from last year. The ECB Hawkish camp will also drive the recent sting of hikes.

It is stated that the ECB is likely to raise the deposit rate even more than the market expects. All of these are significant steps to combat the inflation outlook. Schnabel also said they require it but is this a sign that Europe's recession is getting closer?

Just Counting the Days Until the European Economy Enters the Recession Phase

A previous Reuters survey showed that the median European inflation will occur at the end of 2022 or early 2023. High inflation and interest rates that continue to increase are the main reasons why the eurozone economy is falling into a recession.

A 50-point basis makes the most sense, but the ECB shouldn't be aggressive. Because it was said that if bold, the Euro’s value would shoot down, but their non-aggressive nature would make it take longer for the economy to get out of the abyss of recession.

Meanwhile, the European Central Bank has indicated that at least higher for lower risk will save Europe's economic balance. The aim is to absorb Euro liquidity first before they aggressively leverage the European economy.

Europe will most likely experience the effects of a recession during the first quarter of 2023. The economic contraction is in the spotlight. Trade value with market considerations. But it is said that this is just a mini-recession, and the economic consensus remains safe.

Referring to the data shown by the European Central Bank, a recession will occur at the end of this year or at least at the beginning of 2023. But the aggressive nature may be retaken by Europe. Because, one day after Christmas, the European economy did not improve.