ECB: July hike could be the last one, but risks are tilted toward more tightening after the summer – Nordea

The ECB hiked rates by 25 bps as expected. Economists at Nordea discuss the prospect of future hikes.

Hiking very likely to continue in July

The ECB raised rates by 25 bps, as expected, while Lagarde argued that the ECB still has more ground to cover and is very likely to hike rates again in July. 

Staff forecasts put core inflation at 2.3% still in 2025, and Lagarde confirmed the ECB is not happy with the inflation outlook.

We think the July hike could end up being the last one of the cycle, but risks are clearly tilted toward the hiking cycle continuing after the summer.

The initial market reaction was hawkish, with rates rising, but rates started to fall soon after, and continued downwards, as Lagarde did not signal more than one more hike in July.