TD Securities strategists highlight that Euro area Harmonised Index of Consumer Prices (HICP) inflation rose to 2.9% y\/y in July, with core inflation at 2.5% and services inflation at 3.3%, indicating only limited evidence of meaningful second-round effects. Markets continue to price a 25 bp European Central Bank (ECB) rate hike in September, which remains the TD\u2019s base case. It notes that only a clear and durable resolution to the Middle East conflict would materially alter this outlook.<\/p>\n
Euro inflation keeps September hike priced<\/p>\n
“Euro area HICP inflation for July came in at 2.9% y\/y (market: 2.9%; prior: 2.8%).”<\/p>\n
“So overall, there was a small tick up in both core and services but still limited evidence of meaningful second-round effects.”<\/p>\n
“Markets continue to fully price a 25bp ECB<\/a> rate hike in September, which remains our base case.”<\/p>\n “A material shift in this outlook<\/a> would likely require a clear and durable resolution to the Middle East conflict.”<\/p>\n