European stocks fall sharply as policymakers seek to rein in runaway inflation

The DAX chart of the German stock price index is pictured on the stock exchange in Frankfurt, Germany, August 26, 2022. REUTERS/Staff

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Aug 29 (Reuters) – European stocks fell sharply on Monday as bond yields jumped as comments from central bank policymakers heightened fears of aggressive measures to stamp out inflation amid growing recession risks .

The pan-European STOXX 600 (.STOXX) fell 0.8% to an over-month low, with rate-sensitive tech stocks (.SX8P) falling the most, down 1.4%. Germany’s ten-year yield jumped 10 basis points (bps) to hit a two-month high.

European Central Bank (ECB) board member Isabel Schnabel warned over the weekend that central banks must act forcefully to fight inflation, even if it drags economies into recession.

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This followed Federal Reserve Chairman Jerome Powell’s warning on Friday that the Fed would raise rates as high as necessary to limit growth. Read more

Joining the chorus, ECB Governing Council member Francois Villeroy de Galhau said on Saturday the bank needed another “significant” hike in September, while ECB policymaker Martins Kazaks , said a recession in the euro zone was very likely, but that alone would not bring inflation down, and the bank should opt for a sharp rate hike next month. Read more

Markets now price two-thirds the risk that the ECB could raise rates by 75 basis points at its September meeting, up from 24% last week. ECBWATCH

UK markets were closed for a summer bank holiday.

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Reporting by Anisha Sircar in Bengaluru; Editing by Subhranshu Sahu

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