- The wage growth and wage outlook have remained moderate so far
- No clear signs of second-round effects
- Keeping inflation expectations anchored will be essential to ensure this remains the case
There’s nothing major from his remarks here. The ECB still looks poised to act again in September to better position themselves for further rate hikes if needed, should second-round effects start to materialise.
As mentioned before, the ECB had already cut interest rates down to roughly neutral territory before this latest adjustment cycle. And even with another rate hike to follow, the deposit facility rate will only go back up to 2.50%. At that level, it is arguably deemed to be only marginally restrictive.
And so if the ECB were to really have to deal with an inflation problem, there will be many more rate hikes to follow that up – especially in the case of dealing with potential second-round effects.
For some context, traders are pricing in ~90% odds of a rate hike for September next with ~58 bps of rate hikes priced in by June next year.
This article was written by Justin Low at investinglive.com.