September ECB Cheat Sheet: Pick your poison
A dovish-leaning hike The ECB is likely to deliver a 25bp rate hike to 2.50% on 10 September. In line with its new, somewhat unorthodox communication style, the Bank had already all but pre-announced the move through media guidance following the July meeting. Recent developments have only strengthened expectations for further ECB tightening. This week’s ...
ECB set to raise rates by 25 basis points to 2.50% on September 10th, per the bank's new, somewhat unconventional communication style. Recent events have only bolstered expectations for additional tightening. The current hike is already priced in, with markets discounting a total of 75 basis points in hikes by June 2027. The ECB must signal whether inflation or overtightening risk is its primary concern.
Recent data has been more encouraging than anticipated, with core inflation dropping to 2.4% in August and growth exceeding expectations. However, bond market instability remains uncertain. The Bank may consider a less hawkish approach due to fiscal concerns and rising bond yields. Any hikes beyond September would shift policy from the "insurance" end to "restrictive" territory, lacking sufficient data support.
Markets may underestimate concerns about overtightening and spillover effects on European bond markets. The baseline scenario expects a dovish ECB meeting, with rates leaning lower than hawkish market pricing. The terminal rate is currently projected at 3%, up significantly from the 2% average in 2025. Although oil prices have influenced this, other factors like improved growth outlook and US rate spillovers also contribute.
EUR/USD may face some downside risks as the ECB's hawkish view on the eurozone could be challenged. The near-term EUR/USD target remains 1.150, with a return to 1.160 expected by year-end.
Written by urgent.news from Hellenic Shipping News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
