Nordea’s Ole Håkon Eek-Nielsen and Jan von Gerich now expect the ECB to deliver four consecutive 25 bp rate hikes starting in June, despite recent ceasefire news in the Middle East. They stress that core inflation has exceeded target for more than four years, the labour market remains tight and the economy has shown resilience, keeping inflation concerns elevated at the ECB.

June liftoff and four-hike sequence projected

"We updated our ECB forecast just before a ceasefire was announced, now seeing four consecutive 25bp rate hikes, starting in June."

"The ceasefire news put the risks to our ECB forecast to the downside, but we continue to think the forecast remains viable."

"Our ECB forecast does not rely on a further escalation in the Middle East, as signs of broader price pressures appear to have been on the increase already before the war in the Middle East."

"Finally, the comments from many ECB Governing Council members have mainly suggested that while the ECB has some time to assess the situation, talking against a hike as early as the April meeting, a June hike remains likely."

"In the longer end of the curve, our ECB view, a growth forecast showing resilience and continued expectations of higher term premia all support a further rise in longer yields."

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