ECB Rate Hike Expected: Markets Eye Lagarde's Press Conference

The European Central Bank (ECB) is widely expected to raise its deposit facility rate by 25 basis points (bps) this week, taking it to 2.50%. This move is seen as a neutral or mildly restrictive step by policymakers at the central bank.

The rate hike itself will not be a game-changer in the battle against inflation but rather a building block for future policy decisions. Traders are already pricing in around 47 bps of rate hikes by year-end and 80 bps by June next year, including this week's expected increase.

The real focus will be on ECB President Christine Lagarde's press conference after the decision. Her tone and communication will be closely watched to gauge the central bank's appetite for further policy tightening. A neutral or measured approach from Lagarde could imply that markets are already pricing in the right level of rate hikes, while a more hawkish tone could lead to a reevaluation of market expectations.