ECB September Rate Hike All But Certain as BOJ Board Member Pushes for Faster Tightening

The European Central Bank is widely expected to raise interest rates at its September 10 meeting, with market pricing showing a 98.9% probability of a 25 basis point increase that would lift the benchmark rate to 2.5%. Euro zone bond yields have held near multi-year peaks in the lead-up to the decision, while the euro firmed against the US dollar in anticipation of the move. Investor consensus on the hike itself is near-total, but markets remain divided on the pace and extent of further tightening beyond September.

Separately, Bank of Japan board member Kazuyuki Masu delivered a hawkish signal from Fukui, warning that the BOJ's policy rate has stayed below the neutral-rate range for too long and should be raised soon. Masu cautioned that persistent or broadening inflation pressures could force the central bank to move more rapidly than planned, while also noting that the pace of future increases would be determined meeting by meeting. A Reuters poll published around the same period showed markets pricing a BOJ hike to 1.25% on September 18, with a further move to 1.75% expected in the second quarter of 2027.