Futures markets are pricing in a 99.7% probability that the European Central Bank will tighten monetary policy by 25 basis points to 2.5% when it meets Thursday. What’s less clear is whether its president, Christine Lagarde, will signal even more restrictive policy in the months to come or tack a more cautious, noncommittal course. Much depends on the potential for resolution versus escalation in the Strait of Hormuz.

ING’s economists told their clients in a note published Tuesday that, while anticipating the 25bp move like almost everyone else, they think Lagarde will keep her options open and push back against the current bond-market consensus that there will be another three quarter-point increases by June 2027.

The ING team of Francesco Pesole, Michiel Tukker and Carsten Brzeski believe the move was effectively preannounced by the bank’s last policy statement in June. Where they differ from the market consensus is in voicing their opinion that inflation data have been more encouraging than expected with eurozone’s core consumer-price index only up 2.4% on a year- over-year basis in August.

Four scenarios for the Sept. 10 meeting of the European Central Bank. ING

Their other point of departure from consensus is that they think bond-market stability matters intensely to Lagarde. Fiscal concerns are a problem in several countries, chiefly France, at present, and, with bond yields rising, Lagarde may be anxious not to upset those bond markets. 

Furthermore, the ING team reckons, if Lagarde opts for a hawkish stance, policy moves from “the insurance end of the spectrum to the restrictive,” and, in its opinion, the data do not support such an approach right now.

Deutsche Bank’s chief economist, Mark Wall, and colleague Michael Kirker polled clients ahead of Wednesday’s meeting  to find out how they thought things would go. Deutsche Bank itself calls for a quarter of a percentage point of tightening this month and another quarter-point in December, taking its terminal rate (the expected peak or trough of any loosening or tightening cycle) to 2.75%. 

In the write-up of the survey dispatched to clients Tuesday, Deutsche Bank’s clients are also a little bit less hawkish than the consensus. The bank’s survey found 42% of those polled expect a more dovish tone, in line with ING’s thinking, than the bond markets are currently discounting.

Expectations for the tone of the ECB press conference. Deutsche Bank’s dbDataInsights

Regarding the terminal rate, clients are divided roughly evenly among 2.5%, 2.75% and 3%, but there is genuine disagreement about when the ECB might start easing with some respondents thinking it could be as early as the second quarter of 2027, while a quarter of them deem it unlikely till 2028. Crucial to this process will be when (or if) the Strait of Hormuz fully reopens to allow oil supplies to normalize. The markets still expect this to be imminent, with the fourth quarter of 2026 and the first quarter of 2027 the most frequent responses.

In Wednesday trading ahead of the meeting, the euro was trading broadly unchanged against the dollar at $1.16, while the STOXX Europe 600 Index Continuous Futures Contract was 0.57% lower at 646.

Lagarde’s own future is likely to be discussed due to the news that her autobiography, to be titled “Lady First,” is set to be published in January.