📝 EU April Flash CPI Strengthens Our Call For A 25Bp Hike: ING

Even if headline inflation has come down and will come down further, this is not yet the moment of relief. The ECB doesn’t want to repeat the previous mistake of underestimating inflation and will therefore be willing to go too far, even if this eventually turns out to be a policy mistake.

The only open question is whether the ECB will go for 25bp or 50bp. Out in the open, only Austrian central bank governor Robert Holzmann has been advocating 50bp. The other hawks, like Isabel Schnabel, recently left the option of 50bp open but didn’t officially subscribe to it. Sticky inflation data clearly stresses the need to continue hiking, but with last week’s weaker-than-expected GDP growth report and today’s weak loan growth and loan demand data, the case for slowing down the pace and size of rate hikes has become stronger. We stick to our call of a 25bp rate hike on Thursday.

- ING