Scotiabank: ECB Set to Hold Rates in July Amid High Uncertainty

Scotiabank said policy adjustments do not need to follow a straight line, especially during periods of elevated uncertainty. According to Jin10, that view appears to be shaping market pricing for the European Central Bank's rate decision next Thursday, with markets expecting the ECB to leave the deposit rate unchanged at 2.25% after a 25 basis point hike in June. ECB President Christine Lagarde's most recent major remarks were on July 1, when she said inflation risks to the upside and growth risks to the downside may now be more balanced than a few weeks earlier because changes are happening quickly. Since then, the conflict between the United States and Iran has resumed, and both WTI and Brent crude have risen by about $12 per barrel. A June inflation report may have bought the ECB more time to assess conditions, given its data-dependent approach. Eurozone headline CPI fell 0.1% month on month, while core CPI eased to 2.4% from 2.6%, its highest level since April last year. Even so, market sentiment indicators showed hawks still largely in control.