ECB Poised for First Rate Hike in Nearly Three Years as Energy Inflation Returns
- Markets widely expect the ECB to raise rates at Thursday night's council meeting
- Iran crisis-driven energy costs have reignited European inflation
- A hike would leave the BOJ as the only major central bank still easing
Frankfurt may complete the global tightening puzzle tonight. Markets broadly expect the ECB to deliver its first hike in two years and nine months, forced by energy-driven inflation from the Iran crisis. The significance for Asian readers is relative position: with the ECB hiking and the Fed leaning hawkish, the BOJ stands alone in easing mode - its governor hospitalized, no less. That makes the weak yen less a Japan story than a global-cycle orphan, inviting repeated tests below 160. For investors, euro deposits and bonds get more attractive, while globally rising borrowing costs widen risk premia on leveraged growth assets. The key is ECB language: a one-off insurance hike, or the start of a cycle? If the latter, memories of 2022's simultaneous stock-bond selloff may resurface. Everything traces back to energy - a Middle East de-escalation would retract the hawks' claws as quickly as they appeared.