Central banks in Europe and Türkiye are heading into a week where they will deliver their latest decisions on monetary policy amid a fresh dilemma posed by the restart in tensions between the U.S. and Iran, which threaten to fuel energy price volatility and complicate the inflation outlook.
Both the European Central Bank (ECB), which oversees economic policy in the eurozone, and the Central Bank of the Republic of Türkiye (CBRT) are expected to hold interest rates on July 23, as conflict weighs on activity and adds fresh pressure on prices, analysts and polls suggest.
Still, markets would look at hints and predictions on the future inflation outlook for the remainder of the year, as well as for more details on what the policymakers currently consider to be the main sources of the strain.
After becoming the first among major banks to hike rates due to the U.S.-Iran war on June 11, the ECB is due to stay on hold this week but will hike for the second time this year in September as a renewed energy price surge raises the risk of more intense inflation pressures, according to a growing majority of economists polled by Reuters.
A 20% jump in oil prices following a re-escalation of war in the Middle East has prompted markets to price in two more rate hikes this year, compared to one until the cease-fire arrangement between the U.S. and Iran abruptly ended.
