ECB: Data and a less hawkish guidance consistent with a 50 bps hike in December – Wells Fargo
27.10.2022, 16:00

ECB: Data and a less hawkish guidance consistent with a 50 bps hike in December – Wells Fargo

On Thursday, the European Central Bank had its monetary policy meeting. They raised the key interest rates by 75 basis points as expected. According to analysts at Wells Fargo, through its forward guidance, the central bank was perhaps somewhat less hawkish than at previous recent meetings. 

Key Quotes: 

“The European Central Bank (ECB) delivered another large rate hike at today's monetary policy announcement, though its forward guidance was perhaps somewhat less hawkish than at previous meetings. With the possibility of an ECB pivot at the meetings ahead, and with changes to long-term refinancing operations potentially impacting the profitability of European banks, today's announcement is overall a modest negative for the euro.”

“Overall, we view the mildly less hawkish guidance and widespread signs of a contracting Eurozone economy as consistent with a smaller 50 basis point Deposit Rate hike to 2.00% in December, especially if CPI inflation recedes to any extent in the interim. That view appears to be shared by market participants, with German two-year government yield down around 18 basis points to 1.85% since the ECB's announcement, and with the euro also down today. If the Federal Reserve fails to pivot at its monetary policy announcement next week, the euro could see further downside in the weeks and months ahead.”

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