The ECB’s May monetary policy account confirmed that the central bank remains preoccupied with upside inflation risks and despite slowing down the pace of hikes, it was seen as imperative to emphasize that hikes will continue going forward.

Our view continues to be one of two further 25 bps rate hikes from the ECB, in June and July, with risks tilted towards the hikes continuing also after the summer. We think it will require much more than one downside surprise in the inflation data to make the ECB stop its hiking cycle.