The European Central Bank’s July meeting minutes, combined with recent economic data, strengthen the case for a September interest-rate hike, according to a note published Thursday by ING. The analysis, authored by Carsten Brzeski, Global Head of Macro at ING, indicates that several policymakers would not have opposed raising rates in July, with evidence suggesting earlier action could reduce long-term costs.
The ECB’s Governing Council ultimately opted for a cautious approach in July, prioritizing the preservation of policy flexibility by deferring a decision until after the summer. Since then, incoming data have exceeded expectations, while downside growth risks have diminished and inflation risks remain skewed to the upside. The minutes also noted no signs of second-round effects from higher energy prices embedding into wage and price dynamics, and long-term inflation expectations remained anchored.
ING highlighted the eurozone’s "almost unexpected resilience" to the Middle East conflict, attributing part of this stability to the disproportionate impact on Asian competitors from the closure of the Strait of Hormuz. The bank questioned whether the ECB would extend tightening beyond September, raising concerns about the potential economic costs of responding to a supply-side shock with further rate increases.
