Members of the ECB’s governing council have reiterated the message of ending APP in early July followed by a 25 basis point hike in the July ECB meeting. Get your market update from RichardSnowFX here:
technical levels in the lead up to the rate decisionECB sets a High Bar for a Hawkish Surprise
Members of the ECB’s governing council have reiterated the message of ending APP in early July followed by a 25 basis point hike in the July ECB meeting. In doing so, members have denied themselves the flexibility of a hawkish pivot which could see the Bank’s first rate hike this week in a bid to normalize monetary policy with the ultimate goal of calming inflation.
Instead, the ECB collective looks set to stick to earlier forward guidance in order to maintain credibility, despite inflation reaching its highest level since the formation of the single currency. On Thursday the ECB is due to release its macroeconomic projections with a large focus on the longer-term 2024 inflation outlook which last measured at 1.9% in the March update.
Current implied probabilities via money markets approaches 75 bps by end of September, implying a 25 and 50 bps hike between July and September. Look out for any indication of a future 50 bps hike or alternatively, a strong preference for smaller 25 bps increments.
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