As many Europeans continue to enjoy their summer breaks, their mood can be lifted by expectations that peak rates loom in the horizon. In July, the ECB hiked the deposit rate to 3.75%, as expected, but at the press conference, President Lagarde opted for a clearly dovish tone. Service sector, the prime engine for economic growth in Europe this year, has started to lose steam, and the ECB is clearly more concerned about growth than before. As it is evident the ECB has now entered the fine-tuning phase in its policy tightening, Lagarde emphasized that they could hike rates again in September, or they could choose to pause, depending on the upcoming data. Furthermore, if they pause in September, they could still hike later on, if necessary. We keep our call of one more hike in September, read more on Flash ECB Review - A decisive maybe, 27 July.
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