A 25bp rate hike next week, taking the deposit rate to 2.25%, looks nailed on and we suspect that will be followed by another in July. But second-round effects of higher energy prices on inflation should be limited, meaning that the ECB’s tightening cycle will be short. We are therefore forecasting “two and done” which would leave the deposit rate at 2.5% at the end of the year. If the Strait reopens and energy prices decline, we think the ECB would probably lower the deposit rate back to 2% in 2027.
We will be hosting an Online Drop-In ahead of the June meeting, featuring a special briefing on how the latest energy shock is shaping discussions within the Governing Council. The session will take place at 10:00 ET / 15:00 BST on Tuesday, 9 June. Register here
Subscriber content
Read this in full, free
Start a free trial and use one of your 10 free starter credits to unlock this piece.
