ECB Preview Securing The Anchor

MUFG expects the ECB to deliver a 25bp rate hike as a pre-emptive insurance move against second-round inflation risks. This is viewed as part of a total 50bp 'measured adjustment' for the year.

Key Takeaways

• 1.The ECB is expected to raise rates by 25bp, framed as a pre-emptive insurance move to address second-round inflation risks.
• 2.The report projects a total of 50bp of tightening for the year, characterizing it as a 'measured adjustment' rather than a full cycle.
• 3.ECB policy projections are expected to show higher inflation and lower growth compared to March, influenced by Brent oil prices.

Table of Contents

• Macro view: The ECB is set to kick off its ‘measured adjustment’ of policy
• Officials want to get ahead of the curve
• An insurance hike – with wriggle room to reverse
• Swift energy pass-through has lifted headline inflation
• The ECB is set to revise its HICP projections higher
• Projections to show higher inflation and lower growth