ECB to Pause Rate Hikes, Signal that More May Be Needed
Christine Lagarde is expected to signal more tightening later as markets price in two to three additional hikes and energy costs keep inflation risks elevated.
- On Thursday, The European Central Bank is expected to hold interest rates unchanged but will signal openness to a September hike as energy prices above $90 a barrel threaten renewed inflation pressure.
- ECB President Christine Lagarde faces a delicate balancing act, as she must signal concern over price pressures while wage growth eases and labour markets remain relatively soft, particularly in Germany.
- "We think the ECB will enter a hawkish pause," Oliver Rakau at Oxford Economics said, noting that financial markets anticipate additional rate hikes though economists argue the bloc needs less tightening.
- Barclays noted that an unusually warm summer in Europe, combined with El Niño effects, could renew upward pressure on food prices, threatening to create shipping bottlenecks.
- Morgan Stanley's Jens Eisenschmidt said inflation will reach target next year, moderately undershooting later, suggesting the 2.5% deposit rate could soon become restrictive.
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The deposit rate is expected to remain at 2.25%, a level that several ECB officials have described as "appropriate" - Markets see another increase in September
The ECB will again decide on key interest rates on Thursday. However, little of the recent increase in June has been achieved by savers.
Christine Lagarde, President of the European Central Bank, should not be playing a role in the fees this Thursday; the reference interest in the euro area will remain at 2.25% for the time being, but they will be able to rise again at the next meeting if negotiations in the Middle East do not arrive at a good port.
The Economic Times
Times of IndiaGlobal Market: ECB seen holding rates steady while keeping September hike option open
The European Central Bank is expected to maintain current interest rates at its upcoming policy meeting. Policymakers will likely signal that further rate increases remain a possibility in September. This cautious approach comes as rising energy prices threaten to reignite inflationary pressures across the euro area. Financial markets are anticipating additional rate hikes, while wage growth and inflation expectations have shown signs of easing.
ECB to pause rate hikes, signal that more may be needed
The European Central Bank is all but certain to keep interest rates unchanged today but will hold the door wide open to another rate hike in September, as a fresh jump in energy prices threatens to put more upward pressure on inflation.
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