ECB: Expecting an earlier and more rapid monetary tightening – Wells Fargo
07.04.2022, 16:01

ECB: Expecting an earlier and more rapid monetary tightening – Wells Fargo

In the wake of recent developments, analysts at Wells Fargo now expect earlier and more rapid monetary tightening (and specifically Deposit Rate increases) from the European Central Bank (ECB) than previously. Their outlook for the ECB to end its quantitative easing program by July remains unchanged.

Key Quotes: 

“The Eurozone economy has had an unsettled start to 2022, as a temporary surge in COVID cases and Ukraine-related uncertainties have weighed on activity. From a longer-term perspective there also appears to be some softening in consumer fundamentals, and we have lowered our Eurozone GDP growth forecast for 2022 slightly to 3.1%.”

“In contrast, Eurozone headline CPI inflation has moved sharply higher, and core inflation has also firmed, though to a much lesser extent. Still, even if price gains do not become broad-based, persistently elevated energy prices and headline CPI inflation could still prompt a response from the European Central Bank (ECB).”

“We now expect earlier and more rapid monetary tightening from the ECB than previously. We forecast an initial 25 bps increase in the Deposit Rate at the September 2022 meeting (compared to December previously). Beyond that, we expect a steady series of 25 bps increases at the December 2022, March 2023 and June 2023 meetings, which would lift the Deposit Rate to +0.50% by the middle of next year.
 

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