TD Securities forecasts a 25bps ECB rate increase next week to bolster credibility amid high energy prices and inflation risks.
The European Central Bank is expected to raise its deposit rate by 25 basis points to 2.25% in its upcoming meeting, driven by persistently high energy prices and the need to reinforce its inflation-fighting credibility. Policymakers aim to anchor inflation expectations while maintaining flexibility for future decisions based on economic data and projections.
Recent euro area GDP data showed a downward revision to -0.2% quarter-over-quarter for Q1, with Ireland’s volatile multinational sector contributing to a record -12.1% drop. However, the ECB is likely to overlook this contraction, viewing it as unrepresentative of broader economic fundamentals.
The central bank’s approach remains data-dependent, with a meeting-by-meeting stance to preserve policy flexibility amid evolving economic conditions.