EUR/USD: ECB’s lagged respose to raising rates to keep the euro on the back foot – MUFG

Will the European Central Bank (ECB) sound more hawkish following in the footsteps of the Bank of Canada and the Bank of England? Economists at MUFG Bank expect the ECB to look through higher energy prices and convey a dovish message. 

ECB not to reveal details of tapering until December

“We do not expect the ECB to sound overly concerned by higher inflation at today’s policy meeting even with higher energy prices expected to lift inflation up towards 4.0% before the end of this year.” 

“We continue to believe that the eurozone rate market has got ahead of itself in pricing in ECB rate hikes in the coming years, and would not be surprised to see some push back from President Lagarde today against higher market rates.”

“The ECB’s main policy focus next year will be slowing their QE programmes. However, we do not expect the ECB to reveal more details of their tapering plans until December.”

“The ECB’s lagged response to raising rates should keep the euro on the back foot while other major central banks are moving closer to raising rates.”

See – ECB Preview: Forecasts from nine major banks, a dovish message of ongoing support