European Central Bank policy rate — the ECB's key interest rate for the euro area, which anchors euro money-market and lending rates. The ECB moves it to steer euro-zone inflation and growth.
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Brazil mid-August inflation rises 4.24% year-on-year, first monthly drop in a year
The Brazilian Institute of Geography and Statistics (IBGE) reported on the 26th that the mid-August consumer price index (IPCA) rose 4.24% year-on-year, while falling 0.40% month-on-month. The monthly decline was the first since August 2025, signaling easing inflationary pressures. The annual rate slowed from July's 4.52% increase and came in below the median forecast of 4.34% in a Reuters poll. Within the central bank's target range, the monthly drop also exceeded the expected 0.30% decline. The downward factors included declines in housing costs of 1.41%, transportation of 1%, and food and beverages of 0.57%. The central bank this month cut its policy rate by 25 basis points to 14%, marking the fourth consecutive rate cut and leaving room for further easing. The next meeting is scheduled for September 15-16.
ECB Tightening Outlook Supports Euro Against Dollar: BNY
BNY's Geoff Yu highlights that European Central Bank Executive Board member Isabel Schnabel sees further rate hikes as necessary, with Euro area inflation risks still tilted to the upside and growth more resilient than expected. This hawkish stance from the ECB provides support for the Euro against the US Dollar, as the market anticipates continued monetary tightening from the central bank.
Hungarian Forint Recovery Tied to Euro Entry Story: ING
The Hungarian forint's recovery is tied to the euro entry story, according to ING's Chris Turner, after the National Bank of Hungary cut its policy rate by 25 basis points to 5.50%, with Chief Economist Peter Virovacz seeing a terminal rate of 4.75%.
Commerzbank reports that Hungary's central bank, the Magyar Nemzeti Bank, cut its base rate to 5.50% but avoided pre-committing to further easing, stressing that September's Inflation Report will guide policy. The bank will monitor global rate hikes, which could limit the scope of future cuts. This cautious stance offers modest support for the Hungarian forint.
European Central Bank (ECB) Executive Board member Isabel Schnabel said in an interview with Bloomberg News published on the 26th that interest rates need to be raised further, as the prolonged Middle East conflict and the resilience of the euro zone economy pose upside risks to inflation. She stated, "At the current level of policy rates, it is unlikely that inflation will return to target in the medium term, so further tightening will be necessary."
ECB set to raise interest rates in September to curb inflation from Iran war
The European Central Bank (ECB) plans to raise interest rates at its September meeting to address economic pressures from the Iran war, with the policy rate expected to increase to 2.50% from 2.25%. This follows the first rate hike in nearly three years in June, aimed at preventing soaring energy prices from spilling over into other parts of the economy. The rate increase has been reflected in the ECB's economic projections since June, with policymakers viewing it as necessary to avoid a repeat of the severe inflation seen after Russia's invasion of Ukraine in 2022. Key drivers of inflation include surging natural gas prices and persistently high fuel prices at the pump. With inflation near 3% and the conflict in Iran ongoing, coupled with a still-strong eurozone economy, the ECB's Governing Council deemed it necessary and appropriate to raise rates again. However, the ECB has not signaled further hikes beyond the September meeting.
Turkey's central bank to resume 37% repo auctions after Iran war shock eases
Turkey's central bank is preparing to resume weekly repo auctions at the policy rate of 37% to bring funding conditions in the financial system back to normal, after assessing that the most severe economic impact from the war in Iran may have passed. Previously, the central bank suspended funding at the 37% policy rate from early March and switched to a higher overnight lending rate of 40%, effectively a stealth rate hike, to cope with uncertainty after the war erupted in Iran. However, in a statement released on Sunday evening, the central bank did not say when it would resume weekly repo auctions. Fatih Karahan, the central bank governor, said during the presentation of the quarterly inflation report earlier this month that resuming weekly repo auctions was on the central bank's agenda, with the goal of normalizing liquidity conditions rather than signaling monetary easing. Karahan also said at the time that he believed the worst impact of the war had passed. Tugberk Citilci, research director at Fiba Yatirim in Istanbul, said the decision appears to reflect that the central bank has ruled out the possibility of Brent crude oil prices climbing back above $100 per barrel. However, the timing of the central bank's move surprised the market. Turkey is highly dependent on oil and natural gas imports, making its economy highly vulnerable to the surge in global energy prices caused by the war. Volatile energy and food prices have added to domestic inflationary pressures. As a result, the central bank raised its year-end inflation forecast in August to 28% from 26%, bringing it closer to market expectations, while Turkey's annual inflation rate stood at 31.8% in July. The return to weekly repo auctions at the 37% policy rate is therefore seen as an important step in bringing the central bank's funding mechanism back to normal after it had to use a higher overnight rate to cope with war-driven volatility. However, the central bank stressed that the move should not be interpreted as the start of monetary easing amid still-high inflation.
Eurozone consumer inflation expectations fall for third straight month
According to the July consumer expectations survey released by the European Central Bank on the 21st, eurozone consumers' inflation expectations declined for the third consecutive month. The median expectation for inflation over the next 12 months fell to 2.9 percent from 3.0 percent in June, and the median expectation for three years ahead also declined to 2.7 percent from 2.8 percent. The five-year outlook was unchanged at 2.4 percent. Inflation is still expected to remain above the ECB's 2 percent target. The ECB raised interest rates in June in response to inflation driven by factors such as energy stemming from the Middle East situation, and a Reuters survey of economists expects an additional rate hike next month.
Eurozone composite PMI hits highest since last November in August, led by manufacturing
S&P Global reported on the 21st that the flash eurozone composite purchasing managers' index for August came in at 52.1, up from 52.0 in July and the highest since last November. It also beat the Reuters consensus forecast of 51.7, with new orders growing at the fastest pace in 40 months and export orders, including those within the eurozone, rising for the first time since February 2022, when Russia invaded Ukraine. The manufacturing PMI rose to 52.8 from 51.9, the highest in more than four years, and output growth reached its strongest in 54 months, while the services PMI was unchanged at 51.7. Employment increased for the first time this year, with manufacturing resuming hiring after more than three years and services posting the fastest growth in eight months. Price pressures remained elevated but were easing, with input cost growth at a six-month low and output price inflation slowing to a five-month low. Chris Williamson, chief business economist at S&P Global Market Intelligence, said that given solid business sentiment, a recovering labour market and sticky inflation, the European Central Bank is likely to maintain a hawkish bias and cannot rule out a rate hike in the near term.
Sweden's central bank holds policy rate at 1.75%, signals possible rate hike this year
Sweden's central bank decided on the 20th, as markets expected, to keep its policy rate unchanged at 1.75%. In a statement it said the possibility of a rate hike this year still remains, indicating it is prepared to tighten if the pace of price increases accelerates. Inflation excluding volatile energy prices accelerated to 0.6% year-on-year in July from 0.4% in June, but it remains well below the central bank's 2% target. Sweden is exceptional in Europe in that its headline inflation remains at a low level, partly because of temporary tax cuts by the centre-right government ahead of elections on September 13.
Iceland raises interest rate to 8%, highest in over a year, to curb inflation
The Central Bank of Iceland raised its policy interest rate for the third time this year to 8.00%, the highest level in more than a year, to curb inflation that has stayed above 5% and risks becoming entrenched due to the Iran war. The Monetary Policy Committee voted to raise the seven-day term deposit rate by another 0.25%, with four of the five members supporting the increase while one member wanted to keep the rate unchanged. The central bank said inflation expectations remain too high. Although inflation is expected to fall rapidly in 2027, the outlook is still highly uncertain, especially given the global economic situation and domestic labour market conditions. A key risk comes from the labour market, where the consumer price level is likely to hit the threshold in the national wage agreement within this month. That would open the door to terminating the agreement early if inflation exceeds 4.7%, and could lead unions to demand additional wage increases, triggering a wage-price spiral. Earlier, the Icelandic government tried to ease pressure by temporarily cutting petrol taxes during the summer, but the end of that measure could cause inflationary pressure to build again. The central bank views the second-round effects from higher goods prices as less severe than previously feared, while signs of cooling in the labour and property markets indicate that monetary tightening is starting to affect the economy. The central bank has now raised rates by a total of 0.75% since the start of the year. The decision comes ahead of a referendum later this month on whether Iceland should resume negotiations to join the European Union.
Peru central bank holds rates for 11th straight meeting, sees no need to hike
Peru's central bank held its policy rate at 4.25% on the 13th. The hold was the 11th consecutive meeting, matching market expectations and prior remarks by the monetary policy chief. The central bank said 12-month inflation expectations rose to 3.0% in July, reaching the upper bound of the target range. Monetary policy chief Carlos Montoro indicated that recent inflationary pressures are temporary and there is no need to raise rates, and projected that inflation will slow to the midpoint of the target range by early 2027.
European Markets Summary: Stocks Edge Higher, Bond Yields Rise, ECB Rate Hike Expectations Strengthen
European stocks edged higher on the 10th, with the STOXX Europe 600 index closing at a record high for the fifth consecutive trading day. Meanwhile, in eurozone bond markets, yields rose against a backdrop of higher oil prices, and financial markets are pricing in the view that the ECB's deposit rate will climb from the current 2.25% to around 2.7% by year-end, and be raised further to about 2.8% by March 2027. Crude oil futures gained after Iran stated that the reopening of the Strait of Hormuz requires the US to meet conditions including compensation, lifting the oil and gas sector index. The London stock market fell back, with the FTSE 100 slightly lower and the mid-cap FTSE 250 index down 0.44%. Eurozone employment data and US CPI figures are due later this week, and are in focus for clues on the interest rate outlook.
Philippine Central Bank Keeps Door Open for Rate Hikes Despite Slowest ASEAN Growth
The Philippine central bank is still leaving room for further interest rate increases if needed to control inflation, even though the economy grew just 2.3 percent in the latest quarter, the lowest among ASEAN countries that have reported so far. Governor Eli Remolona said the central bank is ready to tighten policy as much as necessary to bring inflation back within the target range, acknowledging that the disappointing GDP figure has partly eased pressure for rate hikes, but inflation remains above the 3 percent target despite slowing for a third straight month in July. This year, the BSP has raised rates by a total of 0.50 percentage points and its next policy meeting is scheduled for August 27.
Czech Koruna softens against Euro as CNB holds rate at 3.75%
The Czech National Bank kept its policy rate at 3.75% and adopted a wait-and-see stance, according to Commerzbank’s Tatha Ghose. The decision follows a 25 basis point hike in June, even as the central bank continues to cite upside inflation risks. The Czech koruna softened against the euro in response.
ECB raises rates for first time in two years and nine months, but euro buying and yen selling may be restrained
The European Central Bank decided on the 11th to raise its policy rate by 0.25%. This is the first rate hike in two years and nine months, since September 2023. The euro-dollar pair recovered to 1.2081 dollars in January 2026, and the euro-yen pair was bought up to 187.70 yen on April 15, 2026. However, the Bank of Japan decided at its June monetary policy meeting to raise rates from 0.75% to 1.0%, which could somewhat restrain risk-seeking euro buying and yen selling.
Bank of Mexico Holds Rates Steady for Second Straight Meeting, Pushes Back Inflation Target Timeline
The Bank of Mexico decided unanimously at its monetary policy meeting on the 6th to hold the policy rate at 6.50 percent. This marks the second consecutive hold, in line with market expectations. In its statement, the central bank pushed back the expected timing for inflation to converge to the 3 percent target to the fourth quarter of 2027, from its previous forecast of the second quarter of the same year. It noted that risks to the inflation outlook are tilted to the upside, amid persistently high core inflation, trade policy disruptions, and peso depreciation risks. An economist at Capital Economics said the statement was slightly more hawkish than the previous one, and that a rate hike by year-end is possible.
Brazil's central bank cuts rate by 0.25% to 14%, signals further reduction in September
Brazil's central bank unanimously decided to cut its policy interest rate by 0.25 percentage points to 14.00%, the lowest level since March 2025 and the fourth consecutive rate cut, in line with market expectations. It left the door open for further reductions at its September meeting, stating that the decision will depend on economic data received before the next meeting. The Monetary Policy Committee remains concerned about the persistent long-term inflation outlook breaching the target range, and reiterated that it is monitoring closely as this could make disinflation more economically costly. The central bank kept its 18-month policy horizon inflation forecast unchanged at 3.2%, while lowering its 2026 inflation forecast to 5.1% and raising its 2027 forecast to 3.8%.
Bank of Thailand holds first IAA talks in 10 years, signals accommodative monetary policy and crackdown on grey capital
The Bank of Thailand met with the Investment Analysts Association for the first time in about a decade. Governor Wirachai Rattanakorn disclosed that on 30 July he welcomed IAA Chairman Paiboon Nalinrungruang, along with board members and senior analysts, to exchange views on the more accommodative monetary policy direction, financial system stability, and structural solutions, especially the strict blocking of grey capital circuits. The central bank provided in-depth information on GDP trends, inflation, and the policy interest rate to help analysts value assets and set investment strategies, while outlining projects and plans to be carried out continuously to prevent illicit funds from undermining the stability of the financial system and the Thai business sector.