Ecb Decision: Worse To Come Instead Of One-And-Done

The ECB raised interest rates by 25bp in a hawkish move that reflects an overreaction to supply-side inflation, increasing the risk of recession. Despite this, there remains a potential path for the ECB to pause if energy prices continue to decline.

Key Takeaways

• 1.The ECB delivered a 25bp rate hike, but the decision to leave future paths open and the upward revision to core inflation suggests a hawkish stance that risks policy overreaction.
• 2.There remains a possibility that the ECB will pause further hikes if energy prices continue their downward trend and demand destruction contains second-round inflationary effects.

Table of Contents

• ECB DECISION: WORSE TO COME INSTEAD OF ONE-AND-DONE?
• Still a chance for “one and done”:
• Looking back instead of ahead:
• A problematic pattern?