Monday, 17 August 2026Europe · Analysis
Independent · Brussels & Berlin
Person
Global head of macro, ING
May flash estimate exceeds ECB target by more than a percentage point, locking in expectations of a rate hike at next week's meeting while Germany, France and southern members diverge sharply.
Markets price a June hike but policymakers insist on meeting-by-meeting approach with Strait of Hormuz blockade creating 'layer cake of shocks' risk
The deposit facility rate stays unchanged after seven consecutive cuts, with Lagarde signalling patience until the EU, US tariff picture clears. Markets still price one more move this year but the bar has risen.
Switzerland, Sweden and Norway joined the ECB and Bank of England in easing policy this week, citing tariff-driven export weakness and a falling dollar that is pushing inflation below target.
Friedrich Merz won the chancellery on the second ballot after an unprecedented first-round failure, but the CDU/CSU-SPD coalition faces immediate tests on economic reform, defence spending and internal trust.
Markets price 94% chance of quarter-point reduction to 2.25% as trade tensions override previous expectations of a pause in the easing cycle
Fifth reduction since June comes after zero growth in final quarter of 2024, with Germany and France both contracting. Markets price in another full percentage point of cuts this year.
The newsletter
Delivered to your inbox on the days we publish. No daily digest, no push notifications, no advertising.