Fengye Bank: During a period of elevated uncertainty, the European Central Bank will keep interest rates unchanged in July

Deep Tide TechFlow message. On July 18, Scotiabank said that policy adjustments do not have to follow a straight line, especially during times of high uncertainty. This view appears to be guiding the market’s pricing of the European Central Bank’s interest-rate decision next Thursday. The market expects the ECB to keep the deposit facility rate unchanged at 2.25% after raising rates by 25 basis points in June. Market expectations are also generally that rates will remain on hold.

The ECB president Lagarde’s most recent major comments were on July 1, when she said: “I think the upside inflation risks and the downside growth risks we face may have become more balanced than they were a few weeks ago, because developments are changing rapidly.” Since then, the conflict between the United States and Iran has erupted again. WTI and Brent crude both rose by about $12 per barrel. To some extent, this was offset by the fact that the June inflation report may have given the ECB more time to assess the situation—after all, the ECB follows the “data-dependent” principle. The euro area’s overall CPI fell 0.1% month over month, and core CPI eased year over year from 2.6% (the highest since April last year) to 2.4%. Even so, market sentiment indicators clearly show that hawks still broadly dominate. (Jin10 Data APP)