The ECB’s move will come after nine consecutive increases, totaling 425 basis points (from -0.50% to 3.75%). There is a pause option on the table, but the US inflation figure, which rose to 3.7%, beating analysts’ expectations, may weigh on it.
At the last meeting before the summer recess, on July 27, ECB President Christine Lagarde said anything would be possible in September: a first break after nine successive interest rate hikes, or a new increase. Nothing has changed over the summer, and the decision expected today remains more open than ever. The Euro Tower announcement is expected at 1.45pm, with the Lagarde conference expected to take place an hour later.
Increase or stop?
Today’s decision comes after nine consecutive increases of a total of 425 basis points (from -0.50% to 3.75%), without ever thinking about stopping. Now the pause is on the table, supported by the doves, with a new increase, which is what the hawks are pushing for. Until yesterday, the two options were 50/50, but after US inflation data – which rose to 3.7%, above expectations – something changed: the Federal Reserve, which has already raised interest rates to the highest level in the last 22 years. It will have to decide what to do next week, and analysts are already predicting at least one more increase by December. According to some analysts, this will be the last chance to raise interest rates before the economy becomes too weak to come under new credit pressure. The alternative would be to opt for a pause, giving previous increases time to take effect, but tightening the tone on subsequent moves, barring interest rate cuts on the medium horizon.