ECB expected to lift deposit rate to 2.5 percent
The ECB has hiked its deposit rate to 2.5%, a preventive measure aimed at managing energy-driven inflation stemming from the Middle East conflict rather than broad demand pressures. While core inflation has cooled to 2.4%, the bank has raised its longer-term price forecasts, setting the stage for similar moves by the Federal Reserve and Bank of Japan later this month.
GN markets/policy (en-US) confirms the governing council's decision to lift the main refinancing rate to 2.65% and the marginal lending facility to 2.9%, noting that staff projections have been revised upward for 2027 and 2028. The report highlights that this second hike in three months follows a July signal from Christine Lagarde to model oil and gas scenarios, with the bank aiming to remain well-positioned against uncertainty driven by the Middle East conflict.
Source: GN markets/policy (en-US)GN markets/inflation (en-US) confirms the ECB has executed the move, raising the main refinancing rate to 2.65% and the marginal lending facility to 2.9%. The central bank explicitly attributes the need for tightening to the Middle East conflict rather than domestic demand, noting that energy inflation has surged to 14.3% while core inflation has actually cooled to 2.4%.
Source: GN markets/inflation (en-US)GN markets/policy (en-US) highlights that the 25-basis-point increase is now almost fully priced in by traders, shifting the immediate focus to President Lagarde’s commentary on the path forward. The report also notes that resilient eurozone bank lending and economic data provide the central bank with the capacity to maintain a restrictive stance, despite rising bond yields weighing on activity.
Source: GN markets/policy (en-US)According to GN markets/policy (en-US), core inflation in the eurozone actually declined to 2.4% in August, indicating that energy costs are not yet driving broader price increases. The report characterizes the expected quarter-point hike as a 'dovish' insurance measure, noting that the ECB's deposit rate would remain within its neutral range despite the energy shock.
Source: GN markets/policy (en-US)The European Central Bank is poised to raise its key rate by a quarter point, signaling a shift toward tighter monetary policy to combat persistent inflation.
Source: GN auto markets/bonds: interest rates
