"I therefore assume that the September step will initially mark the end of the current tightening"

"The increase in the deposit rate by 25 basis points to 2.5 percent was largely priced in. Numerous experts had also recently positioned themselves in the direction of an interest rate hike – but the decision was by no means a foregone conclusion. The decisive factor now is therefore less the step itself than the question of how the ECB classifies the further monetary policy course.

The main argument in favour of tightening is the recent rise in inflation in the euro area to 3.3 per cent. Higher energy prices in particular are keeping price pressures well above the ECB's medium-term target of 2 per cent. At the same time, the situation is by no means clear-cut: core and service inflation have so far been comparatively moderate, broad second-round effects are only discernible to a limited extent, and the labour market also presents a mixed picture. Declining wage growth, weaker employment growth and more moderate unit labour costs argue against an automatic start to a new cycle of interest rate hikes.

I therefore assume that the September step will initially mark the end of the current tightening. Although the ECB's mandate remains clearly geared towards price stability, the side effects of further interest rate hikes are increasing: higher capital market yields are weighing on growth, investment and refinancing conditions and exacerbating fiscal pressures, especially for highly indebted countries such as France and Italy. Nevertheless, the ECB is likely to continue to decide on a meeting-by-meeting basis – against the backdrop of volatile energy prices, fluctuating financial markets and a high level of geopolitical and economic uncertainty overall."