A Risk-Management Hike

Rabobank expects the ECB to raise the deposit rate by 25bp in June and again in September to reach a 2.50% plateau, driven by inflation risks from the Middle East conflict.

Key Takeaways

• 1.The ECB is expected to implement a 25bp 'risk-management' hike in June, bringing the deposit rate to 2.25%.
• 2.A second hike is likely in September, taking rates to a plateau of 2.50% to anchor inflation expectations.
• 3.Prolonged closure of the Strait of Hormuz is causing a stagflationary shock with higher inflation and lower growth forecasts than the ECB's March baseline.

Table of Contents

• Policy rates: A measured response
• Inaction is no longer an option
• Economic outlook: Stronger headwinds
• An updated Iran baseline
• The inflation outlook has deteriorated
• Growth is faltering

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