Analysts say euro area inflation must improve significantly to avoid a September ECB rate increase amid rising oil prices and soft economic data.
The European Central Bank’s September rate hike prospects have strengthened as inflation risks tilt upward and economic indicators soften. Analysts note that ECB President Christine Lagarde’s recent guidance aligns with the bank’s baseline scenario, which now favors tightening unless inflation data improves markedly.
Earlier assessments in June and at the Sintra forum suggested a more balanced inflation outlook. However, rising oil prices and weaker-than-expected PMIs have shifted expectations, making a rate hike more likely. Sources indicate that avoiding a September increase would require a sharp improvement in inflation data.
Market reactions remain cautious as traders weigh the ECB’s next move. Some council members had already considered a hike this week, reinforcing expectations for further tightening.