Preview – Deutsche Bank sees ECB pausing this week before a September rate rise
A widely expected pause this week would leave the deposit rate at 2.25%, with attention shifting quickly to how the Governing Council frames the balance of risks around energy and inflation. Market pricing for the endpoint of this tightening cycle has swung meaningfully in recent weeks, dropping to 2.50% when oil prices fell sharply in June before rebounding to 2.75% as Middle East tensions escalated again. That volatility leaves scope for a hawkish surprise if incoming data, including today's flash PMIs, point to persistent price pressure building beneath the headline inflation numbers. A dovish tone from President Lagarde, by contrast, could reinforce the view among traders that the tightening cycle is closer to its end than current pricing suggests.
--- Deutsche Bank expects the ECB to pause this week after June's hike and deliver one final move to 2.50% in September, even as swinging oil prices and a softer than expected inflation print complicate the outlook heading into Thursday's decision.
Earlier:
Summary:
- The European Central Bank is expected to hold rates at its meeting this Thursday, following June's rate hike
- The rate decision will be published at 14:15 CEST, which is 12:15 GMT and 8:15am US Eastern time
- President Christine Lagarde's press conference follows at 14:45 CEST, which is 12:45 GMT and 8:45am US Eastern time
- One more hike to 2.50% is still expected in September, marking the final move in this tightening cycle
- The latest euro area inflation print surprised to the downside, though there is not yet convincing evidence that indirect inflation effects have faded
- Oil prices have been the dominant swing factor, with market pricing for the ECB's endpoint dropping to 2.50% in June before rebounding to 2.75% as Middle East tensions reignited
- This week's July flash PMIs will be the other major data point for markets alongside the rate decision
The European Central Bank is expected to leave interest rates unchanged at its meeting this Thursday, taking a pause after June's rate increase before what Deutsche Bank still expects to be one final hike in September. The Governing Council's decision will be published at 14:15 CEST, or 12:15 GMT and 8:15am US Eastern time, with President Christine Lagarde's press conference to follow at 14:45 CEST, equivalent to 12:45 GMT and 8:45am US Eastern time.
Thursday's meeting is not one of the ECB's quarterly projection rounds, meaning the Governing Council will not publish fresh staff forecasts for growth or inflation, leaving the policy statement and Lagarde's press conference as the main channels for guidance this week. That puts extra weight on how the Bank characterises recent inflation data. The latest euro area HICP print came in softer than expected, and there is not yet convincing evidence of the kind of indirect or second round inflation effects that would argue for continued tightening, though such effects can take time to show up in the data.
Energy prices remain the dominant swing factor shaping the policy outlook. A rapid drop in oil prices through June pulled market pricing for the ECB's ultimate rate down to 2.50%, in line with the case for just one further move. That pricing has since reversed, with renewed Middle East tensions and a fresh rise in oil prices pushing market expectations back up to 2.75%, reflecting greater uncertainty about how much further the Bank may need to go.
Beyond the rate decision itself, this week's July flash PMIs across the euro area are expected to draw close attention, offering an early read on how growth and price pressures are evolving heading into the second half of the year. Together, the ECB meeting and the PMI releases are set to be the two events that most shape market thinking on European rates this week.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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