Lates News

The Bank of Fengye stated that policy adjustments do not have to be linear, especially in times of high uncertainty. This view seems to be dominating the market's pricing of the European Central Bank's interest rate decision next Thursday, with expectations that the ECB will keep the deposit rate unchanged at 2.25% after raising it by 25 basis points in June. Market expectations are generally for the ECB to stand pat. ECB President Lagarde's most recent significant statement was on July 1st, when she said, "I think the upward risks to inflation and downward risks to growth might be more balanced than a few weeks ago because change is happening rapidly." Since then, the conflict between the US and Iran has erupted again. WTI and Brent crude oil have both risen by about $12 per barrel. To some extent, the June inflation report may have bought the ECB more time to assess the situation, as the ECB adheres to a "data-dependent" principle. Overall, the euro area's CPI fell by 0.1% on a month-on-month basis, while core CPI fell from 2.6% (its highest since April of last year) to 2.4% on a year-on-year basis. However, market sentiment indicators clearly show that hawks still dominate overall.