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ECB rate outlook faces renewed hike risk as energy prices rise

ING expects the ECB to keep rates unchanged next week, but says renewed Middle East tensions and higher oil have revived the case for a possible hike.

Reported · Written up by our desk · Central Banks

ING’s Carsten Brzeski says the European Central Bank is likely to hold interest rates steady at its upcoming meeting, but a surprise rate hike remains possible.

Brzeski points to renewed Middle East tensions and rising oil prices that have shifted the macro backdrop back toward the ECB’s base case from its June meeting, after energy prices briefly eased following the central bank’s last move.

The ECB hiked rates by 25 basis points to 2.25% at its 11 June meeting, and ING says that subsequent volatility in energy prices helped remove certainty about whether further tightening would follow.

ING also notes that next week’s decision will not include new macro projections, and frames the meeting as a final internal clash between “hawks and doves” before the next likely opportunity for a hike in September.

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