'Communication' concerns at the European Central Bank

While some statements have been made by European Central Bank (ECB) officials regarding July, it is considered a difficult task within the bank to give verbal guidance in July. European Central Bank (ECB) officials are anxious to strike the right tone when announcing their targets for the upcoming period after the interest rate hike planned for next week. Officials who spoke to Bloomberg said that Governing Council members see communication regarding the path to be followed after the July 27 move as their biggest challenge. The task will be to avoid giving strong signals of a new interest rate hike or a pause, as officials from different segments have different perspectives on what the outcome of the next meeting in September will be. This concern underscores how sensitive the ECB needs to be after completing the strongest monetary tightening process the 20-country eurozone has ever seen. While investors were expecting two more quarter-point interest rate hikes to bring the deposit rate to 4 percent in order to reduce inflation, the officials’ latest statements have caused a step back. Finally, on Tuesday, Klaas Knot, who has a traditionally hawkish stance, told Bloomberg that there would be no clear-cut option for steps after July.