Markets anticipate a 25bp ECB rate increase in September amid rising oil prices and fragile euro area growth signals.
The European Central Bank is expected to hold rates steady at its July meeting, with a 25 basis point hike in September now fully priced in by markets. Commerzbank analysts rule out a move this month, citing weak economic recovery signals and elevated oil prices as key factors shaping the decision.
Euro area flash PMIs due Friday may underscore fragile growth, while inflation risks remain a focus. Markets have priced in a 24bp increase for September, though ECB President Christine Lagarde is unlikely to pre-commit to the move. The ECB’s tone on inflation risks is expected to remain firm but cautious.
The Fed’s upcoming decision next week will follow the ECB meeting, adding to the focus on central bank policy shifts. Data this week may reinforce expectations of a distant economic recovery, complicating the ECB’s path forward.