ECB Rate Hike Cycle Far From Over

The European Central Bank (ECB) has raised its key policy rates by 25 basis points as widely expected. ECB President Christine Lagarde described the decision as a 'no brainer', which received unanimous support from the Governing Council.

The ECB's communication and staff macro projections suggest that the rate hike cycle is far from over. The bank upgraded its inflation forecasts for 2027-2028, with both headline and core inflation seen above its 2% target over the medium term.

This implies that the ECB has more work to do to combat inflation. The staff's updated projections already incorporated around 50 basis points of additional rate hikes following a technical convention of assuming market interest rates at the cut-off date of the projection.