BofA, JPM Refresh ECB Views Ahead of Weds CPI

A few notable sell-side comments on ECB today ahead of tomorrow’s CPI release:

• BofA write that they expect the energy price shock and persistent supply uncertainty to lower the growth trajectory well into 2024, and add three 25bp hikes to their ECB profile (in Mar23, May23 & Jun23), with the terminal deposit rate rising to 2%.
• They add that we have not yet reached peak hawkishness from the ECB, and see a risk that rates could rise further than anticipated if inflation surprises to the upside tomorrow (not our baseline scenario) and the ECB delivers a 75bp hike at the 8th September meeting.
• Meanwhile, JPM write that the debate at the ECB has likely shifted to 75bps (Schnabel’s preference) versus 50bp (Lane’s preference). JPM will review their current forecast of 50bps hike after Wednesday’s inflation data.
• They add that there is very little in the upcoming data that can shift the views of Lane and Schnabel, especially because the next meeting is just over a week away.
• Their forecast anticipates an ECB pause due to the likely GDP contraction in the autumn/winter. But, JPM have already had to push back the pause and currently expect another 125bp of hikes before a pause starts after the December meeting. This may still be appropriate, but with possibly more than 50bp of this delivered next week.