Nordea’s Jan von Gerich highlights that the ECB delivered a widely expected 25bp hike and is likely to continue tightening, with the next move expected in July. He argues that broadening inflation pressures mean lower energy prices alone will not ease ECB concerns. Nordea’s baseline is for rates to reach 3% via consecutive hikes, above current market pricing.

Broadening inflation keeps ECB on track

"The ECB delivered the widely expected 25bp rate hike, while further clarity on the Fed’s response is expected next week."

"We expect more hikes from the ECB, and even though uncertainties remain elevated, our baseline points to the next move already at the July meeting."

"By now, there are already plenty of signs of broadening inflation pressures, so at least as far as the ECB is concerned, the question is no longer whether there will be a monetary policy response, but how big it will be."

"Lower energy prices alone would probably not remove all the ECB’s inflation worries, which has been confirmed by several Governing Council speakers as well."

"We still think the ECB will hike rates all the way to 3% at consecutive meetings, which is clearly above the current market pricing."

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