The European Central Bank held rates at 2.00% today but Christine Lagarde is already prepping the markets for a “Summer Hammer” in June…
Euro-area GDP grew a dismal 0.1% in Q1, while energy-driven costs are pushing corporate selling price expectations to a staggering 3.5%…
Central bankers are trapped by a “Stagflationary Nightmare,” the UK is likewise freezing rates at 3.75% while bracing for a “worst-case” 6.2% inflation spike…
German manufacturing is reporting a massive “Input Cost Shock,” firms are running out of margin as the Hormuz bottleneck chokes the industrial heart of Europe…
If the June hike happens, the Euro-area enters its first “War Recession” of the decade.
3.5% – 4.4% (Adverse scenario)
“Lagarde warned that “the war in the Middle East has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth”. The ECB president told the IMF’s International Monetary and Financial Committee that the conflict “will have a material impact on near-term inflation through higher energy prices”.
ECB staff projections included adverse scenarios showing headline inflation potentially reaching 3.5% or even 4.4% in 2026 if energy supply disruptions persist. The deposit facility rate remains at 2.00%, with main refinancing operations at 2.15% and marginal lending facility at 2.40%.
Over half of economists polled by Reuters expect the ECB to hold rates April 30 but hike in June as war-driven inflation accelerates. According to Bloomberg, the anticipated quarter-point increase would likely be the only move as the conflict won’t cause a long-lasting price shock.”