On February 27, market participants will scrutinize the minutes of the European Central Bank‘s February meeting released this week for more clues about the magnitude of the next rate hike and the duration of the tightening cycle.
The Management Committee has promised to raise interest rates by 50 basis points in March, but with the arrival of the assessment of the policy path in May, there is some room for adjustment of the rate hike rate.
Hawks may want to see another 50 basis points in May, while doves are targeting 25 basis points. According to market analysis, what will eventually be introduced may be a compromise plan to raise interest rates by 25 basis points in May, and at the same time make some form of commitment to raise interest rates again in June.
The core scenario expects that the decline in underlying inflation will allow the last rate hike in May to be reduced to 25 basis points. However, the odds of a 25 basis point hike in June have risen significantly, especially given the resilience of the economy.
