Members have thus deprived themselves of the option of a hawkish turn, which might see the Bank raise interest rates for the first time this week in an effort to stabilize monetary policy with the eventual intention of reducing inflation which has been quite extreme recently.
Rather, notwithstanding inflation hitting its highest level since the euro’s inception, the ECB consensus appears likely to adhere to its forward projections in order to keep credibility. The European Central Bank is expected to deliver its macroeconomic estimates on Thursday, with a special emphasis on the extended inflation outlook for 2024, which was last assessed at 1.9 percent in the release for March.
The ECB frequently mentions the possible de-anchoring of expected inflation in the mid to long term, therefore a break of 2% in this statistic could speed the normalization, perhaps supporting the Euro’s value. Nonetheless, as previously stated, the likelihood of this occurring at the June meeting is extremely low, notwithstanding markets putting in a 10 basis point hike at above 60%.
The money market indicated probabilities are approaching 75 basis points by the end of September, signaling an increase of 25 to 50 basis points from July to September 2022.