Financial markets are increasingly positioning for a more hawkish European Central Bank as geopolitical tensions threaten to prolong energy-related inflation and complicate the central bank’s efforts to bring price pressures under control, Reuters reported.
Investors are now betting that the ECB’s deposit rate could approach 3% by late 2027, with markets assigning a growing probability to further rate increases after an expected hike in September. The ECB raised rates in June as it responded to inflationary pressures triggered by an energy shock linked to the U.S.-Iran conflict.
