No new policy signals expected from ECB at July 26 meeting; rate hike seen in December 2019, says Danske Bank

The European Central Bank (ECB) is not expected to deliver any new policy signals at its meeting on July 26; however, the central bank is expected to hike rate in December next year, according to the latest research report from Danske Bank.

Draghi’s most recent public appearances in Sintra and at the European Parliament shed no new light on its policy stance, albeit at the EU summit he is said to have voiced concerns about private investment.

Headline inflation was on target in June, but are set to decline towards the end of the year. More important, core inflation dynamics were subdued in June, and only a modest and gradual increase is expected.

The ECB will also take note that oil prices are down some 10 percent in EUR terms since its cut-off date feeding into its June projections, which supports the view that headline inflation will peak in July and decelerate thereafter.

Global trade war concerns are still lingering in the background and the ECB has acknowledged that downside risks to growth due to the threat of protectionism have become increasingly prominent.

Meanwhile, suring the last EU summit at the end of June, the media reported that Draghi said an ‘escalation of current trade tensions can have a larger impact than currently anticipated on the bloc’s economy’ and also that ‘uncertainty and the lower confidence are having a negative, visible impact on private investments’.