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September rate hikes less likely after weak European PMI round. Both the UK and Eurozone reports were much weaker than anticipated and signal an acceleration in the pace of contraction. At the same time the weakness is no longer concentrated in manufacturing, with demand falling across the board. Monetary policy is restrictive on both sides of the channel and the data makes a pause in the tightening cycle in September much more likely. Inflation data for August could still change the picture, with labour market data and wage growth of particular importance for the BoE. As it looks at the moment though, the ECB in particular may want to take a “wait and see” stance now, which makes Lagarde’s comments at the Jackson Hole meeting particularly important. Even if the ECB and BoE were to pause in September, both are likely to keep all options on the table for subsequent meetings and confirm the “higher for longer” stance.