European Central Bank: Neutral communication with upside inflation risks – Nordea

Nordea’s Chief Analyst Jan von Gerich interprets the ECB’s September monetary policy account as supporting further rate hikes, likely in December and March. The Governing Council remains focused on upside inflation risks, especially from persistent energy shocks and resilient growth. At the same time, the ECB avoids pre-commitment, stressing data dependence and neutral communication as it navigates high geopolitical and market uncertainty.

ECB keeps options open on rates

"The monetary policy account from the ECB’s September meeting reinforces the impression that the Governing Council remains primarily concerned about upside inflation risks. While indirect and second-round effects from the energy shock have so far remained limited, policymakers are concerned that a resilient economy could eventually allow broader price pressures to emerge."

"The outlook remained highly uncertain and critically dependent on geopolitical developments. Risks were to the upside for inflation and to the downside for economic growth."

"That said, the ECB was clear that it would not pre-commit or provide clearer forward guidance, keeping its options open amid high uncertainty."

"Overall, the account is consistent with our baseline of further 25bp rate hikes in December and March. While the ECB is not yet seeing broad-based inflation pressures, it is becoming increasingly concerned that persistent energy price shocks and a resilient economy could eventually generate more meaningful indirect and second-round effects. After the recent repricing prompted by concerns about France, current market pricing is once again close to our baseline."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)