ECB is expected to raise the deposit rate 25bps to 2.50% — the move is already
fully priced; markets will treat President Lagarde's press conference as the
main source of new information. Eurozone headline inflation accelerated to 3.3%
YoY in August, with energy and geopolitics pushing gas to the highest levels
since 2022; core and services inflation are continuing to slow, while economic
activity has shown surprising resilience. The hike will put the deposit rate at
the top of the ECB's estimated neutral range. Statement language is unlikely to
change materially; meeting-by-meeting, data-dependent wording and the current
risk-balance framing are expected to remain. Lagarde's tone is the critical
market pivot: a hawkish tone would underline a persistent energy shock, upside
inflation risks and scope for further tightening; a dovish tone would stress
easing core/services inflation and risks of over-tightening via tighter
financial conditions. Prognosis for forecasts: markets expect upward revisions
to growth; inflation outlooks diverge — Goldman Sachs sees modest 2026 downside
but brings 2027 headline inflation up to 2.7% (core 2.6%); UniCredit leans
hawkish; MUFG flags 2026 revisions and warns forecasts may be outdated. Key
policy question is whether September marks the end of the hiking cycle — MUFG
and ING lean terminal in September, while Goldman Sachs, Wells Fargo and
UniCredit see material upside risk if energy prices remain high; most banks do
not expect an explicit commitment to further hikes. Market pricing implies
~48bps more tightening by year-end and ~85bps by end-2027; a dovish Lagarde
could prompt downshifts in tightening expectations and pressure the euro, while
a hawkish signal would be needed to support EUR. Near-term risk: US CPI and the
FOMC could quickly re-center market attention and dominate EUR/USD and global
rates moves.
