European Economic Perspectives: ECB: What to expect next week

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European Economic Perspectives: ECB: What to expect next week

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European Economic Perspectives Economics

Europe Ex. UKECB: What to expect next week

Reinhard Cluse

Economist

ECB expected to keep rates on hold at 2.25% on 23 July reinhard.cluse@ubs.com

+44-20-7568 6722

At its 23 July meeting, we firmly expect the ECB to leave the deposit rate unchanged at

2.25%. The meeting will give the Governing Council (GC) an opportunity to assess the Franziska Fischer

Economistlatest data (Figure 6) against the ECB's June macroeconomic projections and alternative

franziska.fischer@ubs.com

scenarios (Figure 7). A key question for next week's meeting will be whether the ECB will +41-44-239 2054

send out any signals about the likelihood of a rate hike at the following meeting on 10

September. Our baseline forecast remains a 25bp increase to 2.5% in September. Felix Huefner

However, recent inflation data and comments from several ECB officials, including Pierre

felix.huefner@ubs.com

Wunsch and Martins Kazaks, have reduced our confidence in that outcome. +49-69-1369 8280

Developments in the Middle East will likely be crucial, particularly whether last week's

rise in tensions proves temporary or marks a renewed escalation that pushes energy Anna Titareva

prices higher. Given these uncertainties, we expect the ECB to maintain its data-

anna.titareva@ubs.com

dependent, meeting-by-meeting approach and avoid pre-committing to a particular +44-20-7568 5083

policy path. In other words, we expect the GC to adopt a "wait-and-see" stance on the

Elena AmorusoSeptember decision. At the time of writing, markets were pricing in 3.1bp of tightening

Strategist

for July, 18.2bp for September, and 32.7bp cumulatively between July and December,