The ECB is expected to hold rates at 2% on Thursday.
The ECB is expected to hold rates at 2% on Thursday. Markets price a 10% chance of a hike today but look to June for the first move.
Lagarde’s tone on inflation and the Middle East conflict will drive the euro’s reaction. Summary: The ECB is widely expected to hold its key deposit facility rate at 2% at Thursday’s meeting, with market pricing implying just a 10% probability of a hike today June is the meeting to watch, with markets pricing between 20 and 40 basis points of tightening by then and BNP Paribas economists flagging it as the most likely point for a 25bp increase The Eurozone composite PMI fell to 48.6 in April, slipping into contraction territory, while inflationary pressures continued to strengthen, presenting policymakers with a classic stagflationary setup ECB staff projections from March revised headline inflation up to 2.6% for 2026 and cut GDP growth to 0.9%, reflecting the energy price shock from the Middle East conflict Lagarde said in late March the ECB was ready to hike even if an inflation overshoot proved temporary, and markets will be listening closely for any softening or reinforcement of that stance today Analysts at TD Securities say the euro could fall around 0.30% even under a neutral scenario where the ECB holds without committing to June, as markets would read that as a pushback against current hike pricing Tighter bank credit standards and weak PMIs are increasing growth concerns within the Governing Council, which could temper the hawkish impulse despite sticky inflation The European Central Bank is expected to leave interest rates unchanged at 2% on Thursday, but the decision itself is almost beside the point. With markets assigning just a 10% probability to a hike today, attention will be squarely on President Christine Lagarde’s press conference and whether her language reinforces or softens expectations for a move in June.
The case for caution is clear. The Eurozone composite PMI slipped to 48.6 in April, falling back into…