ECB to hike in May, size of the move remains open – Nordea
20.04.2023, 13:36

ECB to hike in May, size of the move remains open – Nordea

The next meeting of the Governing Council of the European Central Bank is May 4. Jan von Gerich, Chief Analysts at Nordea points out that the majority of the board remains preoccupied with upside inflation risks, and is set to push further rate hikes. He argues that the size of the May hike will largely be determined by the data released just ahead of the meeting.

Key quotes: 

“The monetary policy account of the ECB March meeting confirmed that had it not been for the March banking sector worries, the central bank would have been more determined in signalling more tightening ahead. Now that the banking worries have continued to recede, the upside inflation risks evident in the account are likely to push the ECB into hiking rates several times further, subject to incoming data of course.”

“Another rate hike at the May meeting looks like a done deal, but the size of the move remains open. Market pricing is tilted towards a 25bp rate hike and that is also our baseline. However, an important data batch will be released on 2 May, just two days ahead of the ECB May meeting. On that date, the flash estimate for April inflation, the Q2 bank lending survey and the March credit numbers will all be out, and could yet tilt the scale towards a 50bp rate hike. One should thus prepare for large volatility already ahead of 4 May ECB meeting.”
 

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