The European Central Bank may need to raise rates again, three policymakers warned on Friday, though none pushed for an immediate move in September. Oil back near $100 a barrel has reinforced expectations of another hike, and markets now put the odds of a September move around 72%.
Three European Central Bank policymakers said on Friday that inflation risks are high and the bank may need to tighten again, yet all stopped short of demanding an outright move at the September meeting. Their comments landed a day after the ECB left all three key rates unchanged on Thursday.
Oil near $100 revives the price threat
The pause came with oil prices back around $100 a barrel and natural gas costs surging, reinforcing bets that the ECB will act after the summer break. Policymakers are watching whether the oil spike feeds into broader inflation.
According to Reuters, Bundesbank President Joachim Nagel pointed to a fragile Middle East and said: “We are still facing intense uncertainty.” He also said the June hike had left the ECB well placed to respond to any worsening of the inflation outlook.
Policymakers stop short of committing
Others echoed the caution. Slovenian central bank chief Primož Dolenc wrote in a blog post that the risks ahead remain high, citing the war in Iran as an added danger.
Austrian central bank chief Martin Kocher said a hike may become needed but that it was unclear whether it would come in September. Speaking separately, Kocher said he sees no hard evidence of second-round effects from higher energy costs, and said the growth forecast isn’t great while ruling out a recession. None of the three committed to a rate hike in September.
Markets lean toward September
Money markets see at least two more ECB rate hikes, with the first fully priced by October and the second by February. Economists polled by Reuters are more cautious, expecting just a single hike in September.
The probability of a September move currently stands near 72%. Holding rates steady would require a de-escalation in the Middle East and benign inflation data.
Sources: Investing.com, InvestingLive
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