Franklin: The European Central Bank expected to hold on to interest rates in September

On 22 July, David Zahn, Europe’s fixed-income manager in Franklin Dunpton, stated in a report that the Agency’s basic forecast was that the ECB would hold a final interest rate hike in September, and that inflation would remain above the ECB’s 2 per cent target for the next few quarters. Thereafter, it is expected that the ECB will remain in place to assess the impact of the austerity policies already in place. According to Zahn, however, the ECB remains highly reliant on economic data. “If tensions in the Gulf rekindle to raise energy prices and make inflation higher than the target for a longer period, policymakers may be forced to consider a further increase in interest rates.” Franklin Templeton expects the European Central Bank to start easing its policies in 2027. Kim Xian