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Daiwa Capital Markets Expect Final 25BP Hike, However Pause Would Be Prudent

ECB
  • Daiwa have noted that given the marked deterioration in recent survey indicators and likelihood that much of the impact of the substantive monetary tightening already implemented has yet to be fully felt, they think that a pause in the rate-tightening cycle would now be prudent.
  • However, the hawks have had a majority on the Governing Council for more than a year. And with most hard macroeconomic data not having deteriorated as far as the survey indicators, headline inflation on track to exceed the ECB's forecast this quarter, core inflation still too high for their comfort, and the inflation outlook still very uncertain amid higher oil prices, Daiwa think that a hawkish majority will still hold.
  • Therefore, Daiwa currently expect the ECB to hike rates once again, by 25bps, taking the deposit rate to 4.00% and the cumulative tightening since last July to 450bps.
  • But while the Governing Council will also signal that rates are likely to remain restrictive for as long as necessary, and additionally state its readiness to tighten policy further if incoming data demand it, that should represent the peak in rates for this cycle.
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EM BulletFixed Income BulletsHomepageBulletMarketsEmerging Market NewsForeign Exchange BulletsEuropean Central Bank (ECB) Market News

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