Kristian Nummelin at Nordea expects the European Central Bank to hike rates next week as elevated inflation and strong core momentum keep price pressures in focus. Markets are pricing a similar outcome. Nordea’s baseline remains four ECB hikes in total, taking rates to 3%, though a weaker growth outlook could shorten the cycle, with surveys soft but hard data still holding up better.

Inflation keeps ECB on track

"While the Fed is well positioned to stay on hold in the coming meetings, the ECB faces greater urgency."

"The latest inflation figures did not offer good news for the ECB, and although we do not yet know all the details, monthly core inflation momentum was quite strong."

"There is still uncertainty about how much higher energy prices will spill over into broader inflation, but PMIs and other surveys suggest that price pressures are visible in the service sector."

"With current inflation numbers, the ECB is set to hike rates next week (Thursday), and markets are pricing in the same outcome."

"Our baseline remains four ECB hikes in total although a weaker growth outlook could ultimately result in a shorter hiking cycle."

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