abrdn: ECB is not pausing

abrdn: ECB is not pausing

12 juni 2023

ECB
ECB (2).jpg

Paul Diggle, Group Chief Economist at abrdn, comments on this week's ECB meeting:

'The ECB is almost certain to hike the deposit rate 25 basis points to 3.5% this week. That much is clear from President Lagarde and others’ insistence that the ECB 'is not pausing'.

The interest will therefore be in the new forecasts and the communication about the future policy path. 

The updated staff macro projects are likely to show slightly weaker growth and lower inflation, given recent data developments including the confirmation of a winter technical recession. But the Governing Council has put less weight on the forecasts recently, instead focusing on the current inflation overshoot and the need for policy to tighten to deal with it.

Meanwhile, the ECB’s signalling about the future policy path has been clear about the direction of policy (i.e. interest rates higher) but ambiguous about how many more hikes this might mean. We think the ECB will hike again in July, but the turn in both headline and core inflation lower, and building evidence of the lagged impact of earlier policy tightening weigh on credit growth and investment, will probably make that the final hike of this cycle.'

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