Euro‑area activity has surprised to the upside and July bank lending
accelerated, implying previous ECB hikes have not yet materially slowed the
economy and leaving scope for further tightening. Senior economist Martin
Wolburg says Lagarde is expected to adopt a ‘hawkish wait’ stance, keeping the
door open to additional hikes; markets price one more ECB hike this year and 1–2
next year, while some economists view recent moves as possibly the last for now
even as upside tightening risks rise. Financing conditions have tightened:
euro‑area long-term sovereign yields are at levels not seen since the GFC,
driven by inflation and sovereign debt concerns, large tech bond issuance and
German political volatility — a development that limits the ECB’s room for
further rate increases.
