ECB Sets Sights on Another Rate Hike in September Amid Soaring Energy Prices
The European Central Bank (ECB) has all but confirmed another rate hike in September, according to MUFG Research. The bank's statement acknowledged that energy prices remain close to baseline assumptions, but also noted that the 'full inflationary impact of the energy shock has yet to play out', giving some balance to concerns over achieving price stability.
A Bloomberg article sourced from people familiar with the matter confirmed this hike in September unless the inflation outlook improves 'markedly'. The fact that some ECB Governors considered whether a hike was needed yesterday reinforces the prospect of a September hike, which is consistent with MUFG Research's call.
The US dollar gained broadly yesterday, but there are increased downside risks for the euro and pound if energy markets continue to rise. Natural gas prices have surged, already hitting peaks in March, and winter shortages are now an increased concern due to lower-than-average storage rates in Europe.