Christine Lagarde is set to take centre stage in markets on Thursday as the European Central Bank prepares to announce its latest interest-rate decision, with Brent crude holding above 100 dollars a barrel amid an escalating conflict in the Middle East.
The ECB’s Governing Council is expected to raise borrowing costs, but investors will be looking chiefly for guidance from the central bank president on what could follow as energy prices fuel fresh inflation concerns.
The meeting is being held in Berlin, with the monetary policy decision due at 1.15pm UK time and Lagarde’s press conference scheduled for 1.45pm. The ECB’s latest economic projections will also be published during the afternoon.
Brent crude futures were trading above 100 dollars a barrel for the first time since July, while long-term government bond yields climbed to levels not seen since before the global financial crisis. The combination has weighed on market sentiment as the conflict disrupts shipping and threatens to keep pressure on prices.
The euro was little changed at around 1.1637 dollars before the ECB announcement, while futures pointed to a subdued opening for European shares.
Attention will then turn to the United States, where producer-price figures are due on Thursday followed by consumer inflation data on Friday. The releases could influence expectations for the Federal Reserve’s meeting on September 15 and 16, with futures markets implying roughly a 60% chance of a rate increase next week.
Japan’s central bank is also in focus. The yen was trading at about 153.39 to the dollar and has gained around 4% this month, despite the rise in oil prices, as traders anticipate that the Bank of Japan may accelerate interest-rate increases.
In a speech ahead of next week’s policy meeting, Bank of Japan board member Kazuyuki Masu said broadening price pressures had moved underlying inflation “very close” to the bank’s 2% target. His comments added to speculation that policymakers could adopt a firmer stance as the effects of higher energy costs spread through the economy.
