Unicredit Ups ECB Hike Forecasts By 75bp; Lowers GDP Outlook

Unicredit revises up its ECB rate hike forecasts:

• Now expects 175bp in hikes to March 2023 (vs 75bp previously). This includes: 25bp in Jul, 50bp in Sep, then 25bp per meeting until March, with a depo rate peak of 1.25%.
• They also revise down their 2023 eurozone GDP forecast to 1.3% (from 1.9%).
• "We continue to think that the ECB is underestimating the impact on economic activity of the tightening of financial conditions stemming from strong and swift repricing of the yield curve and fading TLTRO induced compression of lending rates. While the ECB’s anti-fragmentation strategy is likely to prevent measurable market tensions, it would not bring sovereign spreads back to where they were before its February hawkish pivot. We expect the central bank to stop hiking when the depo rate enters the lower part of the 1-2% range the ECB regards as “neutral”."