ECB to hike again, growing chance of more to come

The ECB Governing Council looks certain to raise its deposit rate from 2.25% to 2.5% next week. Further ahead, the outlook is becoming harder to call given the recent rise in energy prices. We are not convinced that further tightening will be needed because there are unlikely to be significant second-round effects, so we are forecasting no more rate hikes after next week. However, as some policymakers appear to have already decided that more pre-emptive tightening is needed, the risks to our forecast are growing.