Nomura economists debate the outlook for ECB monetary policy.
The ECB will closely monitor core and service sector prices in the coming months.
So far, core inflation has fallen only 0.4 percentage points from its peak, so, At 5.3%, we are far from being able to conclude that the tightening of monetary policy is over. ECB will closely monitor core and service sector prices in the coming months, particularly the monthly momentum of these series, to judge whether pressures have eased sufficiently as to put an end to the cycle of rises.
We expect the ECB to raise rates two more times from now, that is, 2 increases of 25 basis points in June and July for a terminal rate of 3.75%.. Thereafter, assuming core price momentum has slowed sufficiently, we believe the ECB could end the rally cycle. Inevitably, at that point, the markets will wonder when the first cut might come. We continue to believe that it will be much later than the markets expect and not until the end of 2024.
Source: Fx Street

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