Markets anticipate a pause in rate hikes this week, with a final 25-basis-point increase likely in September amid volatile inflation data.
The European Central Bank is expected to keep its deposit rate unchanged at 2.25% during Thursday’s meeting, pausing after June’s 25-basis-point hike. Attention will shift to President Christine Lagarde’s press conference for signals on future policy amid mixed inflation and energy price trends.
Market pricing for the terminal rate has fluctuated between 2.50% and 2.75% in recent weeks, reflecting volatility in oil prices and geopolitical tensions. Flash PMIs released today may influence the ECB’s tone, with persistent price pressures potentially justifying a hawkish stance.
Deutsche Bank forecasts one final rate increase to 2.50% in September, marking the end of the current tightening cycle. Traders will watch for any dovish hints that could signal an earlier peak in rates.