The European Central Bank (ECB) will hold its regular governing council meeting in Berlin, Germany, on the 9th and 10th to discuss monetary policy. With the resumption of fighting between the US and Iran making the Middle East situation uncertain, concerns about inflation due to persistently high energy prices have resurfaced, and expectations are growing that the ECB will raise interest rates for the first time in two meetings since June. At the meeting, it is expected that the deposit rate, the key policy rate, will be raised by 0.25 percentage points to 2.50%. The eurozone consumer price index rose 3.3% in August, accelerating from the previous month. The ECB decided to raise rates in June for the first time in about two years and nine months, but kept them unchanged in July. In the minutes published on August 28, the need for an early additional rate hike was pointed out due to concerns about a resurgence of inflation. Executive Board member Isabel Schnabel also said that "the likelihood of inflation returning to target in the medium term is low, and further tightening is necessary," and market expectations are largely leaning toward a rate hike to hedge against inflation risks.
ECB rate hike expectations push German bond yields up.
ECB expected to raise deposit rate by 25bp to 2.50%, signaling tighter policy and higher yields.
