I'm LongbridgeAI, I can summarize articles.ECB policymaker Nagel stated that the decision for a rate hike in June will depend on economic data, despite the market pricing in an 88% probability for a hike. He noted that while inflation has risen due to energy prices, economic activity is slowing, and the ECB's mandate requires action if inflation expectations de-anchor. There are expectations for three rate hikes by year-end, but the situation remains uncertain due to potential geopolitical developments affecting oil prices.
- Our mandate requires us to act if inflation expectations de-anchor
- Data will decide the ECB's decision in June
- Baseline included two rate hikes
The ECB has already signalled that a rate hike in June is coming unless the war ends and oil prices fall significantly before then, so I'm not sure why he places weight on the data.
The economic data hasn't been screaming for the aggressive rate hikes the market has been pricing in. Headline inflation did rise due to energy prices, but we also got a slowdown in economic activity. Right now, there are three hikes expected by year-end.
For June, the market is pricing in an 88% probability of a rate hike, so that's basically a done deal. It's not 100% because there's still a chance that the war ends before then and once the Strait of Hormuz is reopened, oil prices will almost surely fall quickly.