ECB Hike Is Priced In as Investors Split — SkimNews
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- ECB is widely expected to raise its key interest rate by at least 25 basis points on Thursday, with LSEG data pricing the probability at 100%.
- Euro zone inflation reached 3.3% in August, while energy inflation surged to 14.3%, both above the ECB’s 2% target amid volatile oil prices linked to threats to Strait of Hormuz transit.
- ECB raised rates in June for the first time since 2023, taking its key rate to 2.25%, then held rates steady at the following meeting.
- Christine Lagarde said the June move reflected upside inflation risks and downside growth risks, while stressing that policymakers were not pre-committing to a particular rate path.
- Felix Feather said the ECB could still hold rates at 2.5% after Thursday, but noted that such a pause would require U.S.-Iran de-escalation to ease energy markets.
- Deutsche Bank found no client consensus on the size of the hiking cycle: more than a third expected a 2.75% rate, one-quarter saw one more hike, and another quarter expected a 3% terminal rate.
Why it matters: A 25-basis-point increase would take the ECB’s key rate to 2.5%, while multi-decade-high European bond yields and differing sovereign spreads complicate policy coordination. The decision and Lagarde’s guidance directly concern European governments, bond investors and the rate path, with no consensus on how many hikes follow.
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