Nordea analysts expect the ECB to pause rate hikes this month but signal further tightening, with a 25bp increase likely in September.
The European Central Bank is set to leave policy rates unchanged at its July meeting, marking a pause rather than a policy shift. Lower-than-expected June inflation and geopolitical volatility in the Middle East have reduced urgency for an immediate move, though a 25bp hike remains possible if tensions escalate further.
Markets have priced in a more than 90% probability of a 25bp hike by September, aligning with Nordea’s forecast. Recent comments from Governing Council members suggest no serious consideration of a July hike, but a clear bias toward further tightening persists. No new staff forecasts will be released at this meeting, shifting focus to signals about future steps.
Nordea anticipates the September hike will not be the last in this cycle, though uncertainty remains high due to Middle East developments and economic outlook risks.