Overview
- The ECB is widely expected to lift its deposit rate by 25 basis points to 2.50% at its policy meeting on Thursday, with markets pricing the move as near certain.
- Energy prices have driven headline inflation back above 3%, with Brent near $100 a barrel and European gas rising after renewed US‑Iran linked fighting pushed supply risks higher.
- Policymakers plan to publish updated multi‑year inflation and growth projections to guide the decision and have signalled a meeting‑by‑meeting, data‑dependent approach.
- Economists are split: some argue a small ‘insurance’ hike is needed to avoid being behind the curve while others say tightening cannot fix a supply‑side energy shock, and most expect a pause after September.
- Rising bond yields and tighter financial conditions mean markets have already absorbed some policy tightening, which could raise borrowing costs for households and weigh on growth.