Pictet Wealth Management: ECB Likely to Raise Interest Rates in September, But Market’s Expectations for Further Hikes May Be Excessive

(1) Nadia Gharbi, Senior Economist at Pictet Wealth Management, stated that unless oil prices fall sharply in the coming weeks, there is a high possibility that the European Central Bank will raise interest rates in September. (2) However, she believes that the current market expectations for further rate hikes may be exaggerated, as there is no obvious sign of second-round inflation effects, the labor market pressure has somewhat eased, the eurozone economy is inherently weak, and the energy shock is exacerbating this weakness. (3) The money market has now priced in nearly 70 basis points of additional tightening by June 2027, a scale of expectation that Gharbi believes may exceed what is actually needed.