VIEW: ING: ECB Enters Final Stage Of Tightening Cycle

ING note that “while today’s hike is the seventh increase in a row, it is the smallest in the current cycle, suggesting that the ECB has entered the final stage of this tightening cycle. Although recent data has confirmed that underlying inflationary pressure is stickier than expected, weak credit growth and the latest results of the Bank Lending Survey have indicated that the rate hikes so far are leaving clear marks on the economy. And these effects have been stronger and materialised faster than the ECB probably expected. In fact, at current levels and given the lagged impact of monetary policy tightening both in the eurozone and the U.S., the risk is high that every single additional rate hike from here could turn out to be a policy mistake further down the road.”

• “Today’s decision signals that the ECB has entered the final stage of its current tightening cycle. In the current, very complicated macro environment with the lagged impact from previous hikes, banking turmoil, and subdued growth but still sticky inflation, the ECB will tread more carefully.”