The ECB laid out its cards for all to see. After retiring the APP on July 1, the central bank will lift key rates (note the use of the plural form) by 25 bps at its July 21 meeting, the first hike in over a decade. It plans to do so again at the September meeting and if the “medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate”. Given that President Lagarde spoke of “upside risks” to inflation, and the direction prices around the world are headed, a 50 bp’er is very likely at this point. Besides, “some” policymakers wanted a half-point hike in July, to the surprise of no one. But whether all three key rates will be lifted in September remains to be seen. We now look for a 25 bp hike in July, followed by 50 bps in September, and 25 bps in October and December. - BMO Capital Markets
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