The European Central Bank has good reasons to hold fire on Thursday after raising interest rates at its past ten meetings.
Yet conflict in the Middle East, pushing energy prices higher, is another headwind to a central bank that has battled an inflation surge. And traders are keen for a sense of how long borrowing costs will stay high.
A weakening economy meanwhile suggests the need for further tightening is limited but the ECB is likely to push back against rate-cut speculation. "We won't have a decision on PEPP reinvestments after the recent rise in yields," said UBS chief economist Reinhard Cluse."The market still has a degree of nervousness.The ECB doesn't want to pour oil into the fire."3. What does a fresh rise in energy prices mean?
He added that, for now, Lagarde would be keen not to get"dragged into" discussing energy prices until it becomes clearer if the run-up will be sustained.