• 83% of economists expect ECB to raise deposit facility rate by 25 bps to 2.50% in September
• 80% of economists expect the deposit facility rate to remain at 2.50% by year-end
• 63% of economists expect the deposit facility rate to stay at 2.50% until at least Q3 2027

Well, the 57 of 69 (~83%) of economists expecting a rate hike next month is more than the 72% before the July meeting as well as the 65% in June. So, that represents a growing consensus expecting another rate hike by the ECB in September in following up the one in June.

After which, the majority of economists polled expect the ECB to stand pat until year-end with a good number also expecting no further rate changes by the ECB through the middle of next year at least.

As a reminder, the ECB had previously said that interest rates are somewhat in neutral territory around the 1.75% to 2.25% region. So, that is where we are resting now. And even with one more rate hike, that puts monetary policy in a marginally restrictive territory at best.

It’s a position that the ECB can at least hope to use to buy time, but it won’t be enough to counteract any potential second-round effects to inflation. For now, policymakers are adamant that they are not seeing any of that. As such, they won’t be too hasty in reacting to that possibility just yet.

But come what may, just be reminded that the ECB will have plenty of work to do if they are to get things wrong again – like they did back with the whole “inflation is transitory” fiasco back in 2021-22.

Nomura notes that:

“The longer oil prices stay at these levels, the higher they go, the greater the risk we see secound-round effects developing. The ECB can’t do anything about those effects without seeing them but they can act early which is what the ECB has been doing. The risk is if the ECB did just one, it would like like a fine-tuning exercise and everyone knows you can’t really do that in monetary policy. If they go once, they’re probably going to go again. Given how obvious a rate hike looked to the ECB in June, it makes us think another one is highly likely.”