Nomura looks ahead to ECB rate decision

On June 15th, Nomura Securities expects the European Central Bank to raise all three policy rates by 25 basis points at its June meeting, with the deposit rate reaching 3.50%. In our view, the ECB is likely to revise its core inflation forecast upwards across the forecast horizon. As for headline inflation forecasts, we expect upward revisions for this year, little change in 2024 and 2025, and we expect the ECB to slightly lower its GDP growth forecasts. The ECB is likely to keep language similar to the May meeting, as in our view the bank may be comfortable with the current market pricing in a rate hike, although it may not agree that the market continues to price in rate cuts (even if only modest ones) this year . In our view, the ECB may not start cutting rates until the fourth quarter of 2024 at the earliest.