ECB Rate Hike Chances Strengthen as Eurozone Shows Unexpected Resilience

Recent economic data has strengthened the case for a rate increase by the European Central Bank (ECB) in September, according to ING's Carsten Brzeski. The ECB's July meeting minutes showed that some policymakers would not have opposed raising rates at the time, citing the low likelihood of a scenario where further tightening would not be warranted.

The minutes also noted evidence that acting earlier can prove less costly in the long run. Since July, the eurozone has shown resilience to the Middle East conflict, partly due to Asian competitors being hit harder by the closure of the Strait of Hormuz.

However, ING questioned whether the ECB would risk a recession over a supply-side shock if it goes beyond September. Despite this, the bank's members seem supportive of a rate hike, with no evidence that second-round effects from higher energy prices have become embedded in wage and price dynamics.