Franklin Templeton: ECB Expected to Hold Steady After September Rate Hike

On July 22, David Zahn, European Fixed Income Head at Franklin Templeton, stated in a report that the firm's base case is for the European Central Bank to deliver its final rate hike in September, with inflation expected to remain above the ECB's 2% target for the coming quarters. Thereafter, the ECB is expected to hold steady to assess the impact of the tightening already implemented. However, Zahn noted that the ECB remains highly data-dependent. "If renewed tensions in the Gulf region push energy prices higher and keep inflation above target for longer, policymakers may be forced to consider further rate hikes." Franklin Templeton expects the ECB to begin easing policy in 2027. (Jin Shi)