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European Central Bank in the coming week will tread into territory last visited in the run-up to the global financial crisis as it raises interest rates during what looks likely to be a recession.

It was in July of 2008, just as the euro area began four quarters of contraction, that the Governing Council raised borrowing costs for the first time in more than a year, only to reverse course soon after as the collapse of US investment bank Lehman Brothers inflicted unprecedented market turmoil.

This time, officials are confronting far higher inflation, stoked by risks of a different order as the energy crisis incited by the Russia’s war in Ukraine raises living costs and crushes economic growth.

As with central banks from Canada to Colombia that are likely to tighten policy, the ECB’s need to get rates higher to stop consumer prices from getting out of control will keep policy makers focused — even as the risk of a slump looms closer than ever.

That’s why, even as many economists now reckon a recession has begun in the euro region, they unanimously anticipate another jumbo hike of 75 basis points on Thursday.

Memories of what’s now perceived as a policy mistake in 2008 might yet come to haunt the ECB, especially as rates go even higher and begin to constrict growth in due course. Such a prospect is likely to make future hiking decisions in 2023 more contentious, even if this one won’t be.

“The ECB will focus on the extremely high rate of inflation and continue raising interest rates as the economy weakens. We look for another 75-bp hike in October and the deposit rate to end the tightening cycle at 2,25 percent in February.”

Elsewhere, gross domestic product reports may show a return to growth in the US, a contraction in Germany, and a slowdown in France.

The selection of a new UK prime minister and likely unchanged rate decisions in Japan, Russia and Brazil will be among other highlights. – Bloomberg