Nordea’s Tuuli Koivu and Anders Svendsen argue that persistent inflation pressures and a resilient labour market point to a new European Central Bank (ECB) hiking cycle starting in June. They expect four rate hikes before a pause, noting that even if energy disruptions ease, services prices and PMI signals suggest underlying pressures will keep inflation expectations in check only with additional tightening.

Nordea expects four ECB rate hikes

"We expect the ECB to start hiking rates in June Compared to the ECB staff’s March projections, headline inflation is likely to be slightly higher than expected in the second quarter of 2026 and the June projections are therefore likely to revise the baseline profile somewhat higher, at least in the near term."

"For example, PMIs indicate that price pressures have already started to spread to the services sector."

"We continue to expect that the ECB will begin hiking rates in June. Even under a scenario in which the Strait of Hormuz reopens soon, price pressures are unlikely to vanish quickly."

"At the same time, economic growth momentum is now markedly weaker than in the post-pandemic period and we expect the ECB to deliver four rate hikes before pausing."

"Thus, in our baseline forecast, four rate hikes are enough to anchor inflation expectations in the forthcoming wage negotiations."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)