A Pre-emptive Rate Hike

SEB expects the ECB to deliver a 25 bp pre-emptive rate hike on June 11 to address inflation risks, followed by a period of policy uncertainty. Future decisions remain data-dependent with no pre-commitments to further hikes.

Key Takeaways

• 1.The ECB is expected to implement a 25 bp rate hike on June 11 as a pre-emptive measure against inflation risks.
• 2.Communication beyond the June meeting remains highly uncertain with no pre-commitments, suggesting a data-dependent, meeting-by-meeting approach.
• 3.Staff projections are expected to show a downward revision to GDP growth and an upward revision to core inflation compared to March forecasts.

Table of Contents

• A pre-emptive rate hike
• Key points
• Recent ECB communication indicates a June rate hike
• Growth risk skewed to the downside
• Domestic price pressure appears stronger at the starting point
• Uncertain path beyond June
• SEB forecast & market pricing
• Euro area inflation momentum