Economists at ANZ Bank expect the European Central Bank (ECB) to remain determined to get inflation down through both action and guidance.

EA rebound underpins cyclical inflation 

“We have revised up our average euro area (EA) 2023 GDP forecast to 1.3% from 0.7%, reflecting the positive outturn for Q4 growth and recovery in activity and confidence in early 2023. Crucially, our forecasts assume the worst of the EA’s geopolitical/energy crisis has passed.” 

“Cyclical inflation in the EA has not yet subsided. While base effects should help lower annual inflation from March, the ECB will focus on the sequential change in monthly inflation.”

“There is no evidence, in any of the iterations of core HICP, that underlying inflation is moderating. The ECB will need to keep pursuing price stability, and the risks skew towards more tightening.

“We have added 25 bps to our policy rate profile, and now expect the main refinancing operations (MRO) rate will reach 4.0% in June.”