ECB Hikes Interest Rates Amid Rising Inflation Concerns
The European Central Bank (ECB) is set to increase interest rates on September 10th, a move that has been anticipated by markets. The bank will raise the rate on the Main Refinancing Operations and the Deposit Facility by 25 basis points (bps), bringing them to 2.65% and 2.50%, respectively.
This decision is expected to be accompanied by updated economic projections from the ECB's staff and a press conference led by President Christine Lagarde. The move comes as inflation concerns continue to rise, driven in part by renewed hostilities in the Middle East and higher energy prices.
Analysts at BBH note that the Eurozone macro backdrop supports bringing the policy rate closer to the upper end of the ECB's 1.75%-3.00% neutral range. The swaps curve already prices in an ECB rate hike to 3.00% within the next twelve months, which is seen as supportive for the EUR.