Natixis IM: Expectations regarding ECB decision
Mabrouk Chetouane, Head of Global Market Market Strategist, and Nicolas Malagardis, Market Strategist, both affiliated with Natixis Investment Managers, share their expectations regarding the ECB decision on Thursday afternoon.
'The ECB is expected to hike rates again this Thursday, raising its main refinancing rate to 4.50%, and then pause to assess if further adjustments to its monetary policy are necessary. Since the decline in headline inflation observed so far has been almost entirely driven by the dissipation of the energy shock and of supply shortages, President Lagarde is likely to maintain a hawkish tone. The slow pace at which the recent disinflationary process is taking place at the core inflation level does not support any material change on the monetary policy stance.'
'On top of that, the developments with regards to oil supply, which have pushed oil prices above $90 per barrel in recent weeks, are likely to revive fears of higher inflation in a context of weakening growth. Another aggravating factor is that wage increases, which have now caught up with inflation, are likely to trigger second-round effects. In other words, on the back of this seemingly stagflationary backdrop the ECB should opt for a pause.'