ECB policymaker Ante Žigman said the September rate decision will rest on the data and macroeconomic projections arriving in the coming weeks. He warned that the full effect of the recent energy price shock will only become apparent over the coming months. Markets now price a 67% chance of a September hike, below the 75% seen after Thursday’s ECB decision.
The European Central Bank has not settled its September move. Speaking in an interview with Jutarnji List, Žigman said the decision will be based on the data and macroeconomic projections the ECB receives in the coming weeks.
Most policymakers are leaning towards a rate hike, but they are willing to hold rates steady if the US-Iran war ends and inflation does not surprise to the upside.
Energy shock clouds the inflation outlook
Žigman stressed that uncertainty about the inflation outlook remains high, warning that the full effect of the recent energy price shock will only become apparent over the coming months. He highlighted that the intensity and duration of the energy shock will be key factors in determining the impact on the Eurozone inflation outlook.
He also reiterated that the ECB’s goal is to ensure inflation returns sustainably to its 2% medium-term target.
Markets trim the odds of a September hike
The market is pricing a 67% chance of a rate hike in September, which is lower than the 75% seen after Thursday’s ECB decision.
Cautious policymakers’ comments and the expectations for a potential de-escalation led to a slightly dovish repricing.
Source: Investinglive
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