Commerzbank’s Rainer Guntermann argues that the ECB is likely to maintain a balanced hold this week, with April HICP data expected to show energy-driven headline inflation and a temporary dip in core. While current projections outside the severe oil scenario do not clearly demand hikes, unresolved Middle East risks could still prompt a precautionary move in June.

Balanced hold and June hike risk

"New consumer price details for April are due this week, with national releases from Wednesday and the flash €-HICP to follow on Thursday."

"These should show that the inevitable bounce in headline inflation is largely driven by energy prices."

"This should keep the ECB on alert, but a rate hike as early as this week remains premature, particularly after the verbal intervention of ECB members and sources in favour of a hold over the last couple of weeks."

"For now the ECB's projections outside its severe scenario (oil at $145/bbl) do not clearly indicate the need for rate hikes."

"However, with the unresolved crisis in the Middle East, the pass-through risks should be sufficient for the ECB to deliver a 'precautionary hike' in June."

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