German 10-year Bund yields hovered around 3.25%, near their highest level since March 2011, as investors remained wary of persistent inflationary pressures despite the recent drop in oil prices. Fresh inflation figures from France and Spain indicated renewed price momentum in August, bolstering expectations that the ECB could resume interest rate hikes at its September meeting.
Market pricing now implies an ECB deposit rate of about 2.80% by March next year and roughly 2.90% by late 2027. Recent ECB meeting minutes signaled that officials view another rate increase as probably necessary. Separately, Reuters reported that policymakers are prepared to raise rates in September to contain the economic fallout from the war in Iran, although they remain reluctant to signal any additional tightening beyond that move.
In the United States, Federal Reserve Chair Kevin Warsh also adopted a hawkish stance, cautioning that inflation has not slowed meaningfully and stressing that policymakers need clearer evidence of easing price pressures. Without such evidence, he warned, the Fed still has “work to do.”
