The ECB raised rates 25 basis points, as expected. The economists of Societe Generale they expect a new rise of 25 basis points by the ECB in September.
The ECB becomes totally dependent on data
The ECB raised rates another 25 basis points, as it had indicated in June, placing the deposit rate at 3.75%. Instead of signaling any concrete action in September (apart from ruling out rate cuts), the ECB’s action in upcoming meetings will now be entirely data driven, implying that rates could continue to rise after a pause.
The ECB also reduced the remuneration of the minimum reserves to 0% – due to its small size, this is unlikely to have an impact on the monetary policy stance and market rates. This shows that the ECB is sensitive to the losses generated by so many excess reserves. We believe that the theme of reducing losses will continue next year, through an increase in QT.
We still see room for one more rate hike before core inflation turns lower for good, but the latest weakening in the economic data stream also suggests that the September decision will be very tight.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
