Halpenny highlights that the ECB is widely expected to hike at its 11 June meeting, with markets focused on forward guidance for the Euro. He notes Isabel Schnabel’s warning that the ECB can no longer look through the energy shock and that rising de-anchoring risks, alongside firmer Euro-zone CPI, argue for action that is already largely priced in.

ECB hike priced, guidance in focus

"Nine G10 central banks will meet this month with only the RBNZ not meeting and we will likely see some of those central banks act despite the ongoing uncertainty related to the conflict in the Middle East. The OIS market indicates that there are two central banks that are most likely to act – the ECB and the BoJ."

"Executive Board member at the ECB, Isabel Schnabel, stated in South Korea today that the ECB can “no longer look through this shock” and that the “risk of de-anchoring inflation expectations is rising”. Her comments echoed comments from President Lagarde last week, also in Asia, who spoke of the importance of “credibility” and that credibility is “earned through action”."

"There is very little doubt now that the ECB will act at the meeting on 11th June. The inflation data last week points to a pick-up in the euro-zone annual CPI data to be released tomorrow, from 3.0% to 3.2% - also the MUFG estimate (here). The decision is close to priced so the key for the euro will be forward guidance on the potential for a further hike."

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