UBS, 20 April 2026
Rates on hold on 30 April as ECB takes its time to analyse fallout of conflict
We expect the ECB to keep rates on hold at 2% (i.e. broadly neutral) at its upcoming meeting on 30 April. The meeting will give the Governing Council (GC) an opportunity to discuss the latest data and geopolitical developments, and benchmark them against the ECB’s macro projections and alternative scenarios from March. According to our baseline, the ECB will then hike rates by 25bps each in June and September (with a pause in July) bringing rates to 2.5%. We have argued that by the time of the April meeting the ECB would not have sufficient data to justify a rate hike (see Figure 1 for a list of crucial data points). That said, we felt in recent weeks that the forecast risk to our call might be skewed towards earlier (April), faster (April/June or June/July), and larger ECB hikes. However, recent comments by ECB officials, not least President Christine Lagarde and board member Isabel Schnabel, have alleviated these concerns and suggest that the ECB will take its time before deciding on rate hikes. These remarks contrast with press reports released right after the March meeting which suggested that the ECB might hike already in April. In our view, the recent ECB comments raise the bar for an April hike and lower the risk that the ECB’s policy reaction will be more hawkish than our baseline entails. By the time of writing, the news had just broken that Iran might open the Straight of Hormuz; if this news were to be confirmed and prove durable, it could potentially lead to lower energy prices and grant the ECB more time before deciding on rate hikes. At the same time, we would caution that it is premature to conclude already that ECB rate hikes are off the table. The rates markets were pricing c.10bps of ECB rate cuts during 2026 before the Middle East conflict started; by late March, this had swung to more than 80bps of hikes. But following the above-mentioned ECB comments, the pricing of hikes retreated to c. 55bps, before falling further to c. 43bps following the news of Iran potentially no longer obstructing the Strait of Hormuz.
Προσθήκη του MarketsReport.gr στην Google