ECB: A 25 bps rate hike looks likely in May – UOB
|Economist at UOB Group Lee Sue Ann reviews the latest ECB gathering.
Key Takeaways
“The European Central Bank (ECB) stuck with the 50bps hike that it had flagged in Feb as its intention for Mar, with the opening statement of the accompanying press release clearly showing the ECB’s determination to fight inflation. Both the statement and the press conference conducted by both ECB President Christine Lagarde and ECB Vice-President Luis de Guindos highlighted the resilience of the banking sector.”
“The ECB now expects headline inflation to average 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025. It sees core inflation averaging 4.6% in 2023, 2.5% in 2024 and 2.2% in 2025. On GDP, the ECB now expects 1.0% growth in 2023, and for the pace to pick up further to 1.6%, in both 2024 and 2025.”
“In all, the ECB has given us very little in terms of what to expect at the next monetary policy decision on 4 May. From now till then, a lot can happen. It could still bring the current hiking cycle to an abrupt end, especially if banking tensions worsen. We are, nonetheless, penciling in a 25bps hike at the May meeting, on the latest indication of the ECB’s willingness to put out fires in banking woes, as well as fresh forecasts confirming that it probably does not think the fight against inflation is over.”
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