European Daily: ECB Hike or Hold

Goldman Sachs maintains a baseline for an ECB rate hike in September, balancing cooling energy-driven inflation against persistent core inflation pressures. The decision remains data-dependent as current analytical approaches offer mixed signals on the necessity of further tightening.

Key Takeaways

• 1.The ECB Governing Council is weighing a potential interest rate hike against market expectations, with headline inflation pressure easing but core inflation remaining stubbornly high.
• 2.Goldman Sachs maintains a baseline expectation for a September hike, supported by projected growth and inflation data despite lower energy prices.
• 3.The hurdle for a policy hold is low if upcoming data comes in weaker than expected, given that the firm's probability-weighted policy path remains below current market pricing.

Table of Contents

• ECB—Hike or Hold?
• Gauging the Hurdle for a Second Hike
• Another Hike Remains Baseline but Markets Price Too Much
• The European Economics Team
• Disclosure Appendix

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