ECB preview: forget the rate hike and focus on forward guidance
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The ECB is widely expected to hike interest rates by 25 bps bringing the deposit rate to 2.25%, and maintain the data-dependent and meeting-by-meeting approach. The central bank will also release new economic projections where inflation is expected to be upgraded for 2026 but rem
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4 itemsECB preview: a hawkish hold is expected but there's risk of a disappointment
The European Central Bank (ECB) is poised to maintain its policy rate at 2.00% amid a backdrop of rising inflation and mixed economic signals, suggesting a cautious approach moving forward. Per the full note [source], the ECB's forward guidance is expected to remain non-committal, emphasizing a data-dependent stance. Market participants are particularly focused on the press conference for insights into the ECB's reaction function, especially given the recent increase in headline inflation driven by energy prices. The market is currently pricing in 80 basis points of tightening by year-end, with a high probability of a June rate hike, which may lead to disappointment if the ECB adopts a less hawkish tone than anticipated.