ECB IS NOT IN POSITION TO PAUSE TIGHTENING CYCLE – ANZ

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Analysts ANZ think that the European Central Bank (ECB) is not in a position to pause its tightening cycle.

We forecast a 25bp rate rise this week

"The ECB is not yet able to contemplate pausing its tightening cycle. We forecast a 25bp rate rise this week as the ECB balances the lagged effects of previous rate hikes, recent banking turmoil and further tightening."

"Prior to the meeting, however, the updated ECB bank lending survey, M3 data, unemployment and preliminary April HICP data will be published. The ECB will factor this information into deciding the magnitude of its rate rise."

"Clearly, if core inflation is still ratcheting higher in annual terms and both bank lending conditions and credit are holding up well, the ECB could opt for a 50bp rise. Hawks have said that a 50bp rise is on the table."

"The question for the ECB is how persistent inflation will be and if second round effects are emerging. We expect future rate rises to be determined meeting by meeting and see a risk that tightening could extend into Q3."


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