ECB Review: One Hike, No Path

The ECB hiked rates by 25bps, opting for a data-dependent approach rather than a firm path, while downgrading growth and raising inflation projections. UBS anticipates one further rate increase, viewing current market pricing of two hikes as overly aggressive.

Key Takeaways

• 1.The ECB implemented a 25bps rate hike, maintaining a data-dependent, meeting-by-meeting stance without committing to a specific future rate path.
• 2.Quarterly inflation projections were raised to 3.0% (headline) and 2.5% (core), while growth outlooks were lowered due to energy price impacts and geopolitical conflict.
• 3.UBS expects one additional rate hike, viewing market expectations of two further hikes as overly hawkish given the weaker economic growth environment.

Table of Contents

• First hike, balanced tone
• Higher inflation, weaker growth, and a wider range of scenarios
• We expect another rate increase, markets are more hawkish
• Fixed income remains attractive, equities supported by structural growth
• Global asset class preferences definitions
• Appendix

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