Societe Generale expects the ECB to keep rates unchanged next week, with limited new data and a continuing fluid situation in the Middle East. Attention is expected to move towards Euro Area growth and medium-term core inflation.<\/p>\n
The bank now anticipates two 25 bp rate rises, one in June and one in September. It projects core inflation at 2.6% in 2027.<\/p>\n
Policy is expected to stay close to the upper end of the ECB\u2019s neutral range, due to downside risks to growth and ongoing inflation risks. The bank links this view to private sector balance sheets, planned AI and energy investment, and German fiscal stimulus.<\/p>\n
Core inflation is described as close to an adverse scenario, peaking at about 2.8% in 1Q27. The bank does not add further rises beyond the two planned, noting uncertainty around non-linear effects and second-round impacts.<\/p>\n
It expects labour markets to remain tight due to demographic trends, adding to wage pressure. It also points to measures such as the German tax-free employer bonus as a possible short-term boost to wage growth.<\/p>\n
The article says it was produced using an AI tool and reviewed by an editor.<\/p>\n
The European Central Bank is likely to hold rates steady at its meeting next week, as uncertainty in the Middle East and a lack of new data encourage patience. This suggests that implied volatility on short-term interest rate options could soften, offering an opportunity to sell near-dated premium. The focus will instead shift to the growth outlook and persistent core inflation.<\/p>\n
We expect the ECB has learned from its agile response back in March 2025 and will signal future action, likely starting with a 25 basis point hike in June. The ECB’s own negotiated wage tracker showed growth of 4.5% in the final quarter of 2025, supporting the case for further tightening. Derivative markets should therefore begin pricing in a higher probability of hikes for both the June and September meetings, making forward rate agreements for the third quarter look attractive.<\/p>\n
Upside risks to core inflation are building, driven by strong household finances and investment in AI and energy. The latest flash estimate from Eurostat for March 2026 put core inflation at a sticky 2.9%, well above the central bank’s target. This environment makes inflation-linked swaps a relevant tool for traders looking to hedge against or speculate on inflation remaining higher for longer.<\/p>\n
While core inflation could peak near 2.8% in early 2027, the ECB will remain cautious due to downside risks to economic growth. Looking back at the policy debates of 2025, we know the central bank wants to avoid the mistakes of the 2021-22 cycle by acting pre-emptively. This careful balance suggests that while rate hikes are coming, they will be well-telegraphed to avoid shocking a fragile economy.<\/p>\n
Tight labor markets will likely force the ECB to keep its policy stance in restrictive territory for an extended period. Despite the Eurozone manufacturing PMI for April 2026 remaining in contraction at 46.5, demographic trends are creating structural wage pressures. Traders should anticipate a flatter yield curve as the market prices in a higher neutral rate over the long term.<\/p>\n","protected":false},"excerpt":{"rendered":"
SocGen expects ECB hold, then two hikes June and September; focus shifts to growth and core inflation.<\/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-45629","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\/45629","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=45629"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45629\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45629"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}