Commerzbank compares its Euro area inflation projections with European Central Bank (ECB) staff forecasts. It finds they are broadly aligned under a mild Iran War scenario.<\/p>\n
The bank links any move to much higher inflation to a renewed escalation in the Middle East. It notes the ECB\u2019s adverse scenario assumes much higher oil and gas prices.<\/p>\n
Commerzbank reports that energy prices have risen. It says this alone is not expected to push inflation far above current projections.<\/p>\n
The bank states that the likelihood of further ECB interest rate rises has fallen markedly. It adds the ECB may be slightly underestimating indirect energy effects in next year\u2019s projections, but questions whether that would justify higher rates.<\/p>\n
The article was produced using an AI tool and reviewed by an editor.<\/p>\n
We believe the likelihood of further interest rate hikes from the European Central Bank has fallen significantly. The market appears to agree, with Overnight Index Swaps currently pricing in only a 15% probability of another 25 basis point hike by the end of the third quarter. This suggests the current policy rate is seen as the peak.<\/p>\n
Although energy prices have risen, with Brent crude trading near $90 a barrel this month, our view aligns with the ECB’s that this is not enough to force a rate hike. This is supported by Eurostat\u2019s latest data showing Euro area core inflation eased to 2.7% in March, demonstrating that underlying price pressures are softening. Only a severe escalation in the Middle East would likely push inflation high enough to change this outlook.<\/p>\n
We recall the aggressive rate hiking cycle through 2024, which was followed by the long pause that characterized most of 2025. That period of waiting has now fully shifted the market’s attention to the timing of rate cuts, rather than the risk of more hikes. The bar for a renewed tightening policy is therefore exceptionally high.<\/p>\n
For the coming weeks, this outlook favors positioning for stable or falling Euro interest rates. Derivative trades such as receiving the fixed leg of interest rate swaps or buying futures contracts on German Bunds could be advantageous. These positions would benefit if the central bank remains on hold and speculation about rate cuts begins to build.<\/p>\n
The primary risk remains a sudden geopolitical shock, which would cause a spike in energy costs and rate expectations. Therefore, while selling short-term interest rate volatility might seem attractive to collect premium, it should be paired with hedging strategies. Buying cheap, out-of-the-money call options on EURIBOR futures could provide protection against a sudden hawkish shift from the ECB.<\/p>\n","protected":false},"excerpt":{"rendered":"
Commerzbank says its inflation outlook matches ECB forecasts; only renewed Middle East escalation could significantly lift prices.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45615","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45615","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45615"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45615\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45615"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45615"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}