Nordea economists Jan von Gerich and Tuuli Koivu expect the European Central Bank (ECB) to raise rates by 25bp at the June meeting and signal a hawkish stance without firm pre-commitments. They project four consecutive 25bp hikes, taking the deposit facility rate to 3% by October, while noting downside risks and highlighting staff forecasts that still show inflation above target.

ECB seen delivering four rate hikes

"The ECB will hike rates by 25bp next week and likely deliver a hawkish assessment of the outlook – though one without pre-commitments."

"We continue to think that in the absence of further weakening in economic momentum, more signs of broadening inflation pressures will lead to another 25bp hike at the July meeting."

"In fact, we still expect four consecutive 25bp rate hikes and thus see the deposit facility rate hit 3% in October."

"However, baseline staff forecasts, assuming around three rate hikes in total and still likely seeing inflation above target in the coming years, point to further hikes to come."

"In total, these revisions – higher inflation and lower growth in the short run – would take the baseline closer to the ECB’s March adverse scenario and correspond to the views that for example Isabel Schnabel presented recently on the euro-area economy."

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