Official data shows that the eurozone economy expanded more than anticipated in the second quarter, recording a 0.4% quarter-on-quarter increase, surpassing the forecasted 0.2% growth.
This marks a significant rebound from the contraction seen in the first three months of the year, alleviating fears of a recession.
Harry Woolman, a global capital markets analyst at Validus Risk Management, noted: "While the resilience in economic activity will be welcomed by the European Central Bank, policymakers are unlikely to deviate from the data-dependent stance reaffirmed by President Lagarde after last week's policy meeting. Instead, today's data further strengthens the argument for keeping the door open to further tightening if inflationary pressures persist."
"Given the ongoing conflict in the Middle East, which continues to pose upside risks to energy prices and inflation, the ECB faces a challenging task of balancing economic recovery with the potential for renewed price pressures. Therefore, while the market now sees a further rate hike as nearly certain, the stronger GDP data is unlikely to settle the debate ahead of the September meeting."
"These figures reinforce the case for maintaining a restrictive policy stance until there is greater confidence that inflation is sustainably returning to the target level."
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