The European Central Bank, ECB, is expected to leave its policy rates unchanged at this week’s meeting, while at the same time signaling a somewhat more dovish stance against the backdrop of tighter financial conditions. Bank of America writes in an analysis.
The bank continues to expect one final rate hike in December, followed by quarterly cuts from September 2027. Rising energy prices argue for higher rates, while higher long-term yields and tighter financing conditions warrant caution.
The bank also believes that the ECB may signal its readiness to intervene in the event of severe market disruptions, which could support European government bonds. At the same time, the bank sees some upside for the euro.
