ECB: Looking at two more 25bps hikes – Rabobank
16.03.2023, 17:59

ECB: Looking at two more 25bps hikes – Rabobank

On Thursday, the European Central Bank raised its key interest rates by 50bps as expected. Analysts at Rabobank see two more rate hikes of 25 bps ahead. 

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“Despite the market turmoil, the ECB stuck to the 50bp hike it had flagged beforehand, as inflation is still seen as too high. This reinforces the ECB’s commitment to getting inflation back to target, although we believe that markets are nonetheless underestimating the terminal rate in the wake of the meeting. To the extent that this is driven by financial stability concerns, the ECB made clear that Eurozone banks are resilient. If intervention is nonetheless necessary, it will be done in such a way that it doesn’t conflict with the price stability mandate.”

“Significant uncertainty forced the ECB to fully abandon forward guidance.”

“We maintain our call for two more hikes of 25bp. Persistent unrest in financial markets is the main downside risk, but if this fades, inflation persistence could still require higher rates.”

“President Lagarde made it clear that the inflation fight is not over. Nonetheless, markets are currently only reluctantly pricing higher policy rates again. This muted response was perhaps the best the ECB could hope for at this time. When calm returns to the markets, the Council can gradually fine-tune policy expectations. We maintain our call for two more 25bp hikes.”
 

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