ECB policymaker Rehn: We are moving towards the adverse scenario
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In the adverse scenario, it may be warranted to raise interest rates for the sake of credibility Don't see any significant deviation in medium to long-term inflation expectations Wage growth is still moderating The comment in bold pretty much signals their intentions for the June
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The desk believes that the ECB's current communication strategy signals a precarious balancing act between addressing inflation and maintaining economic stability. Per the full note [source], ECB policymaker Nagel's comments highlight a potential June rate hike, with market expectations pricing in a 75% chance of such a move. This aligns with our view that the ECB may be forced to act more decisively if economic conditions do not improve, despite concerns over the effectiveness of monetary policy in addressing supply shocks. The consensus among firms suggests a target range for EUR/USD that reflects these dynamics, with key data points on the horizon that could influence market sentiment.