ECB Review: The Hiking Begins

The ECB delivered a 25bp rate hike in a unanimous, albeit hawkish, move aimed at curbing inflation. Analysts view this as a 'measured adjustment' and continue to expect further hikes this year despite challenging growth prospects.

Key Takeaways

• 1.The ECB hiked rates by 25bp in a unanimous decision, signaling the start of a 'measured adjustment' to policy rather than a full tightening cycle.
• 2.The economic outlook faces risks from the Middle East conflict, with uncertainty regarding energy prices and the reopening of the Strait of Hormuz keeping downward pressure on EUR/USD.

Table of Contents

• ECB Review: The hiking begins
• Macro view: The start of a measured adjustment
• Core inflation expectations revised higher – but the growth outlook is set to darken
• Markets view: Rates already well priced for measured tightening
• EUR/USD drifting lower in absence of Middle East deal & recent hawkish repricing of Fed rate hike expectations