The ECB saw no reason to raise rates today, but policymakers hinted at a September rate hike. This remains our base case. We still believe that 2.50% marks the end of this hiking cycle, but developments in the Middle East increase the likelihood that the ECB is forced to implement additional tightening. If they do, that also raises the odds policymakers will have to reverse course next year, amidst weaker economic activity. The ECB’s assessment of the inflation outlook has not changed materially, despite the recent developments in the Middle East: the inflation shock is large enough to warrant measured tightening, ... (full story)