EZ ECB Monetary Policy Statement

Despite another stretch higher in oil prices, markets are sticking to the view that the European Central Bank will hold the deposit rate at 2.25% at this meeting, in line with our own thinking. September is more likely to see a hike, and indeed markets are pricing in 23bp then. One could argue that front-loading another hike now makes sense. Over the past few years, however, the ECB has not acted without fully telegraphing a move in the weeks before the meeting. With longer-term inflation expectations still well-anchored, the ECB can ...

The European Central Bank is likely to leave rates unchanged on 23 July. Consensus is unanimous and markets are pricing less than a 5% chance of a hike. That fits the natural progression from June’s hike, which was largely driven by higher energy prices, and felt more like an ‘insurance’ move than the start of a tightening cycle. Still, the stream of geopolitical and energy-market headlines since then means that a surprise hike should not be fully ruled out, in our view. Among the more realistic hold scenarios, our baseline remains ...

The ECB is set to leave rates unchanged at its July meeting with markets pricing only a few basis points of tightening next week. Despite the re-escalation in the Middle East and the subsequent rise in crude oil prices, even the hawks have stopped short of making a case that this is a live policy meeting. Joachim Nagel, president of the Bundesbank, said yesterday that rates are currently at an “appropriate” level. Indeed, there is some sense of balance coming into this meeting. The US-Iran deal was signed soon after the ECB’s June ...

Just weeks ago, the 23 July ECB meeting looked like a formality — the last stop before summer break, the one meeting no one would have missed had it been cancelled at the last minute. However, the new escalation in the Middle East and the renewed rise in energy prices have changed the picture once again. Instead of gradually transitioning into summer vacation mode and postponing any rate decision until after the summer, some ECB officials might actually be inclined to push more forcefully for another rate hike. Since the 11 June ...

The 25bp rate hike was pretty much a done deal prior to the meeting. So, the main question we, markets, and reporters had for Lagarde today was: “What’s next?” The ECB president did not answer that question explicitly, but that was to be expected. On balance, the statement was neutral. The ECB’s new “robustness check” supports our call for a follow-up hike in September. Lagarde emphasised that this 25bp rate hike was robust across multiple scenarios. Her comments suggest that some further tightening may be forthcoming, but the ECB ...

The European Central Bank on Thursday became the first major central bank to raise interest rates in response to the Iran war as policymakers around the world including new U.S. Federal Reserve Chair Kevin Warsh wrestle with how to confront the inflation fed by sharply higher oil prices. The ECB’s rate-setting council raised its benchmark rate to 2.25% from 2%, where it had been for a year. The move comes ahead of rate-setting meetings next week at the Fed, the Bank of Japan, and the Bank of England. Oil prices have risen sharply due ...