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📝 ECB's 50Bps Hike On The Table After German Inflation: ING

The ECB has clearly passed the stage of discussing whether and even when policy rates should be increased. The only discussion seems to be on whether the ECB should start with a 25bp rate hike in July or 50bp. In this regard, it is quite remarkable that both ECB president Christine Lagarde and ECB chief economist Philip Lane have tried to take back control of this particular discussion. In an interview released this morning, Philip Lane definitely broke with the previous ECB communication strategy to never pre-commit. Instead, he spelled out the roadmap for normalising monetary policy, de facto announcing an the end of net asset purchases in early July, a 25bp rate hike at the ECB meeting of 21 July and another 25bp rate hike at the September meeting. There is nothing wrong with the content of his remarks as it is exactly what we have already been expecting the ECB to do. However, a de facto pre-announcement almost two months ahead of the 21 July meeting is remarkable, to say the least.

In any case, as today’s German inflation numbers mark an upside surprise for many, the debate on the magnitude of the first hike, be it 25bp vs 50bp, is not entirely off the table. If core inflation in the eurozone continues accelerating in May and June, Lane and Lagarde could still regret their new pre-commitment. - ING Macro Research



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