ecb second-round effects remained absent, several policymakers said, as they repeated a cautious but hawkish message after the latest policy meeting.
Officials said the Governing Council could still tighten policy again if the inflation outlook worsens. However, they also stressed that incoming data will guide the next move. That message matched the line delivered after the previous day’s meeting.
Šimkus said oil near $100 a barrel would affect inflation. He added that the recent rise in energy costs has raised upside risks to the price outlook. Meanwhile, he said policymakers will have more inflation data before the September meeting. He also said another rate hike still looks more likely than a hold. In addition, Šimkus said the ECB still does not see ecb second-round effects from the latest energy shock.
ECB Second-Round Effects Still Absent
Rehn gave a similar message. He said the central bank is not seeing signs of ecb second-round effects. However, he urged policymakers to keep a cool head despite the recent jump in energy prices.
Rehn also warned that the energy crisis is not over. Therefore, he said the Governing Council cannot assume the latest shock will be temporary. Makhlouf likewise said the ECB will have much more information by September. He added that inflation pressures have not gone away.
Markets Price More Tightening Risk
After the ECB decision, post-meeting leaks pointed to a possible September rate increase if the inflation outlook deteriorates. That suggests the ECB would need softer inflation figures and a de-escalation in the Middle East to avoid another hike.
Markets still lean toward more tightening. Notably, the source said the US-Iran war and rising oil prices support that view. Money markets now price a 70% chance of a rate hike in September and about 42 basis points of total tightening by year-end.
You can access our other news on Forex markets and global market developments here.
Source: InvestingLive
