Think Like An ECB Central Banker

The ECB's recent hawkish rhetoric is interpreted as defensive cover for policy moves rather than a signal of a sustained hiking cycle. Market expectations for future hikes remain anchored by energy prices, with a September recalibration hike seen as likely but not certain.

Key Takeaways

• 1.ECB's recent hawkish communication is 'cover' for a reactive policy move rather than genuine forward guidance.
• 2.Market pricing of ECB hikes is highly sensitive to Brent crude oil prices, which remain the primary driver of policy expectations.
• 3.The author expects one further 'recalibration' hike in September, but notes it is not a guaranteed outcome.

Table of Contents

• Think Like An ECB Central Banker
• Market prices out more than 2 “recalibration hikes”
• Besides “recalibration”, oil is still the key variable
• China turning inflationary?
• Oil price boost
• Shipping rates moving higher?
• Food inflation coming?

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