Overview
- The ECB is widely expected to deliver a 25 basis point increase at its June 11 meeting, taking the deposit rate from 2.00% to 2.25%.
- Eurozone consumer prices rose to about 3.2% in May as higher oil and gas costs linked to the Iran war and disruptions near the Strait of Hormuz fed through to energy and consumer bills.
- Traders assign a very high probability to the June hike and have priced roughly 75 basis points of further tightening by year-end, which would imply several more quarter-point moves.
- Some large asset managers, including JPMorgan Asset Management and Pictet, argue the June step may be 'one and done' because weak growth limits the case for a sustained hiking cycle.
- The move will quickly raise borrowing costs for households and businesses, increasing mortgage repayments for variable-rate borrowers, and the ECB's projections and Lagarde's remarks will be watched for the policy path ahead.