If one looks at the Bundesbank rate hiking cycles, the central bank has historically raised its benchmark rate to above the peaks in inflation in each proper hiking cycle since the mid-1950s. For the Fed, a similar relationship holds for the core inflation since the 1970s.
This is not to argue that rates would rise to a peak of more than 10% in the Euro area (the peak in Euro-area headline inflation). However, it is a reminder that if a significantly lower rate will do this time, then it would be an exception compared to history, and one should not be that surprised if the eventual peak will end up being even higher than the around 4% currently being priced.
-Nordea
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