“The ECB kept interest rates unchanged at today’s meeting but signalled that a rate increase is still possible in the near term, as the energy shock extends. In contrast to several other major central banks, including the Bank of England, policy rates in the Eurozone are in neutral territory, contributing to a potential greater need for the ECB to act more swiftly to prevent inflationary pressures from becoming more embedded.”
“The statement continued to emphasise the ECB’s data‑dependent approach. While today’s meeting was not accompanied by an updated set of projections, the Governing Council is likely to place greater emphasis on upcoming data and surveys over the coming months, rather than longer‑term forecasts, given the uncertain geopolitical backdrop.”
“Although rates were left unchanged today, the balance of risks may have shifted although an aggressive tightening cycle implied by current market expectations still appears unlikely. Unlike during the energy shock in 2022, fiscal policy across the Eurozone is more restrictive and the labour market has softened, reducing the risk of second‑round effects taking hold. However, with inflation rising and energy supply disruptions showing few signs of easing, the ECB is likely to begin its rate hiking cycle in June with any further moves remaining highly dependent on incoming inflation and wage data.”
