The European Central Bank (ECB) is anticipated to keep interest rates unchanged in its upcoming meeting, as per a recent Bloomberg survey of economists. Most analysts predict a quarter-point increase in September, which would elevate the deposit rate to 2.5%.

Market Context and Economic Projections

Inflation in the euro zone increased to 3.2% in May, marking the highest level since the start of 2023. This surge in inflation follows rising oil prices linked to geopolitical tensions from the Iran conflict. The ECB’s earlier rate hike in June makes it the first central bank in the Group of Seven to respond to these events, potentially positioning it as the most aggressive entity within the group.

While the consensus remains that no rate changes will occur next week, uncertainties linger due to the evolving situation in the Middle East. Dennis Shen, a lecturer at TU Berlin’s International School of Management, commented on the impact of US-Iran relations, suggesting that if tensions persist, they may lead to inflationary pressures that could force the ECB's hand later.

However, not all economists are convinced that a September hike is inevitable. Chris Hare from HSBC expressed skepticism, stating that if progress toward peace and energy supply stability is achieved, the ECB may not need to increase rates.

Global Rate Landscape

Broader economic factors are also influencing central bank decisions worldwide. The Bank of Korea recently increased its benchmark rate to 2.75%, the first hike in over three years. Meanwhile, the Bank of Japan raised borrowing costs in June to 1%, the highest in nearly 31 years. The Federal Reserve's actions further complicate matters, with recent data showing a drop in the odds for a rate hike this July, from 34.2% to about 10.2%. Nonetheless, expectations for increases by September and October are climbing, with projected odds reaching 50.6% and 60.5%, respectively.

The tightening of monetary policies across major economies is expected to strain market liquidity, which may affect risk assets, including Bitcoin.

This material is informational and not a financial recommendation.