The ECB is expected to keep its policy rate at 2.25% today, giving markets little room for surprise. ING THINK and traders are still treating September as the likelier moment for the next move, with 23bp already priced in.
ECB and 2.25%
Markets are sticking to the view that the European Central Bank will hold the deposit rate at 2.25% at this meeting. That leaves borrowers facing the same financing setting for now, while the first real test for pricing shifts to September.
Over the past few months, the ECB has communicated a hawkish stance and avoided the word “transitory” at all costs. The central bank’s monetary policy meeting is the main event, because it is where that stance is either kept in place or adjusted in a way that markets will read as a signal.
Markets and ING THINK
ING THINK sees a September hike as more likely, and markets are leaning the same way. The 23bp price tag shows traders are not waiting for a full-rate step alone; they are already building in most of one move before September arrives.
Markets are positioned for almost three hikes over the next year, which is a tighter path than a simple pause would suggest. For eurozone borrowers, that means today’s hold does not end the question of costs — it only delays the point at which the next repricing becomes visible.
Inflation swap at 2.2%
The 10Y inflation swap rose on the back of higher oil prices, but it is still close to target at 2.2%. That combination helps explain why the next move is being debated as a September hike rather than a sharper turn today: inflation expectations are not breaking away from target, yet they are not softening enough to rule out another step.
Eurozone consumer confidence numbers for July are also expected to show no improvement from still low levels. The result is a policy picture built around restraint: the ECB can hold now, while markets keep watching whether September brings the signal they are already pricing. Will the ECB keep its guidance unchanged, or leave a clearer mark for September?
The UK and US auctions
Outside the ECB decision, the UK will hold a tender of a 37Y gilt for £0.5bn, and the US will auction a new 10Y TIPS totalling $21bn. Those sales give bond traders two more tests of demand while the ECB message is still being digested.
