ECB: September rate hike prospects strengthen — Nordea

Nordea analyst Jan von Gerich said the European Central Bank is not done fighting inflation, and the prospect of a September rate hike is strengthening. Although the bank kept rates unchanged at its July meeting, its policy focus remains firmly on upside risks to inflation, meaning the tightening bias has not changed.

**Inflation pressures remain a core concern**

The ECB's concerns about inflation are not unfounded. Market signals show the ECB expects inflation to remain well above its 2% target until the first half of 2027, and the full impact of the energy price shock has yet to materialize. Against this backdrop, policymakers believe it is too early to discuss pausing rate hikes. According to reports, at the July meeting, some governing council members even asked whether an immediate rate hike was necessary, highlighting the growing hawkish sentiment within the bank.

**September rate hike expectations converge**

Several institutions have recently expressed similar views. Swiss bank Julius Baer also maintains its expectation that the ECB will raise rates again in September, arguing that stubborn inflation will force the bank to continue acting. Nordea had already factored a September hike into its baseline scenario, and the latest policy discussions have further reinforced this view. Von Gerich noted that as long as inflation data does not show an unexpected sharp decline, the probability of the ECB taking action at its next meeting remains high.