Europe's own central banker says the case for raising rates is missing

On June 11, Europe's central bank raised borrowing costs for the first time in 3 years, and Christine Lagarde spent the press conference refusing to call it a cycle. 6 weeks later, it unanimously left them alone. Polymarket's September market gives another rise an 86.5% chance on September 10.

Most people will look at the inflation figures and stop there. That is the wrong place to stop, because two other markets price the same meeting and neither agrees.

The swaps curve has the rise at 81.7%. Reuters polled 69 economists on Monday, and 83% expect it. Polymarket is 3.5 to 5 points surer than the market that has to hedge the decision.

The case for raising is energy, and it is strong:

• Inflation went 1.7% in January, 3.2% in May, 2.8% in June, then back up to 2.9% in July
• Energy went from 4.1% cheaper than a year ago in January to 10% dearer in July
• European gas costs 97% more than before the Strait of Hormuz shut, per the bank's own August bulletin
• The euro zone grew 0.4% last quarter after a flat one, so nobody can argue it is tightening into a slump

The case against is the president himself. Asked on July 23 whether pay had started chasing prices, which is the bank's own stated trigger, Lagarde said "we are not seeing it," twice, and then "if it was just a matter of concern, we would have hiked."

6 days later, the bank published its wage tracker. Negotiated pay for 2026: 2.3%. So, shoppers cut their inflation expectations across the board.

However, before any move, every trader must focus on two dates: minutes on August 27 and an inflation number on September 1. Both will shed more light on the ECB’s final decision.