ECB: Policymakers to respond to elevated headline inflation – Wells Fargo
12.04.2022, 15:58

ECB: Policymakers to respond to elevated headline inflation – Wells Fargo

On Thursday, the European Central Bank will have its monetary policy meeting. Market consensus sees no change in rates. Most analysts look for the ECB to start responding to elevated inflation levels. At Wells Fargo, analysts now look for a rate hike in September. 

Key Quotes: 

“The Eurozone economy has had a tough start to 2022. A surge in COVID cases and uncertainties tied to the Russia-Ukraine conflict have weighed on overall activity. Consumer excess savings and spending power also seem to be softer now than previously, which we believe can further contribute to a slowdown in activity. Against this backdrop, we recently lowered our Eurozone GDP forecast and now expect the economy to grow only modestly over 3% this year.”

“Despite a softer growth outlook, Eurozone headline inflation has moved sharply higher. Core inflation has also trended higher but to a lesser extent as it does not include volatile price components such as energy and food. But, even with core inflation slightly more modest, we still expect ECB policymakers to respond to elevated headline inflation.”

“We do not expect interest rate settings to change meaningfully next week but do expect ECB policymakers to taper asset purchases; however, we do now expect the ECB to lift interest rates 25 bps at the September 2022 meeting. We also expect steady interest rate hikes over the remainder of this year as well as into 2023.”

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