BofA Sees 125bp Of 2022 Hikes As The "Lower Bound", But No 50bp In July

BofA is still looking for 150bp in ECB hikes following today's decision.

• They think the ECB have in mind hikes of 25bp in July, 50bp in September, and 25bp thereafter, leaving the "lower bound" for total 2022 hikes at 125bp. But BofA sees "plenty of room for inflation to surprise them on the upside, particularly in 3Q".
• With their previous view of a July hike now "clearly less likely (although not unthinkable)" after today's ECB decision, BofA shifts one of the two 50bp hikes they had in their profile from July to October: now seeing 25bp hikes in Jul, 50bp in Sep and Oct, and 25bp in Dec, then stopping.
• They also see the refi rate moving in parallel w the depo rate, in light of Lagarde's comments.
• On fragmentation: "despite plenty of questions on the matter, there was nothing new or specific on how to tackle fragmentation risks. This is quite telling, we think. They felt relaxed enough to flag a SUSTAINED hiking cycle without telling us what happens if spreads keep widening from here. That suggests, to us, that they are not ready to be proactive despite repeated promises they will act if/when needed."