The European Central Bank is expected to keep its benchmark rate unchanged at next week's meeting, according to a Bloomberg survey of economists. But the pause may be short-lived: most forecast a quarter-point hike in September, lifting the deposit rate to 2.5%. The decision comes as central banks from Seoul to Tokyo continue tightening, draining liquidity from global markets — a persistent headwind for risk assets like Bitcoin.
ECB's September hike not a done deal
Euro zone inflation hit 3.2% in May, the highest since 2023, driven by oil prices surging after the Iran war. The ECB already raised rates in June, becoming the first G7 central bank to respond to the conflict. Dennis Shen of TU Berlin said the key question is whether US-Iran tensions prove temporary. HSBC's Chris Hare noted that a September hike 'is not a done deal' — if peace and energy supply improve, the ECB could hold off. Economists surveyed see downside risks to the ECB's June baseline forecasts for growth and inflation, but the medium-term outlook is broadly balanced.
Wider central bank tightening
The Bank of Korea raised its benchmark rate to 2.75% this week, its first hike in over three years. The Bank of Japan lifted borrowing costs to 1% in June, a nearly 31-year high. In the US, cooler inflation data pushed the probability of a Fed rate hike in July from 34.2% down to about 10.2%. The odds for a September hike stand at 50.6%, climbing to 60.5% in October and 72.8% by December. Sustained tightening across the world's major economies is draining market liquidity — a direct headwind for risk assets like Bitcoin.
Liquidity drain hits risk assets
When central banks pull money out of the system, Bitcoin and other speculative assets tend to struggle. The median forecast for the first ECB rate cut is September 2027, though four economists — including at Bloomberg — expect easing as early as March 2027. For now, attention turns to the ECB's meeting next week, and then to the September decision. The path forward hinges on oil prices and the trajectory of the Iran conflict. If the situation stabilizes, rate hikes could be postponed. If it worsens, more tightening is likely.
