PIMCO: ECB reaction towards September

PIMCO: ECB reaction towards September

July 24, 2026

ECB

Konstantin Veit, Portfolio Manager at PIMCO, comments on yesterday's ECB meeting:

  • We believe the balance of risks to inflation has become more two-sided relative to June.
  • Upside risks from energy passthrough and potential second-round effects coexist with downside risks from weak growth momentum and an eventual US–Iran de-escalation.
  • Market pricing of a further 70 basis points of tightening looks stretched to us in this context.
  • We continue to expect the ECB to hike one more time in September.
  • If the ECB concludes its hiking campaign at a 2.5% policy rate, we believe the ECB will aim to preserve valuable conventional policy space, and is unlikely to reverse these hikes next year.