ECB: Data-dependent path as Iran shock unfolds – Nomura
Nomura analysts expect the European Central Bank (ECB) to keep the depo rate at 2.00% at the 30 April meeting and to maintain this level through Q4 2027. They stress that policy will stay data-dependent, with particular focus on Brent Oil prices, inflation expectations and wage dynamics following the Iran war shock.
Nomura sees unchanged rates but hawkish risks
"We expect the ECB to leave the depo rate unchanged at 2.00% at its 30 April meeting, and we expect this decision to be unanimous."
"We believe the ECB will want to avoid a knee-jerk reaction to the Iran war and instead wait to assess the evolution of the war and how it has affected economic data. In particular, we believe the ECB will want to assess how the Iran war has affected consumer inflation expectations and firms’ wage expectations over the medium term."
"In our baseline, we expect the ECB to leave rates unchanged through Q4 2027. However, our ECB forecast is based on the assumption that the Middle East conflict will unfold in such a way that the energy price shock from the war in Iran will have a limited meaningful impact on the euro area economy over the medium term."
"We believe that, if the spot price of Brent crude oil were to remain above $95/bbl by the ECB's June meeting, the ECB would raise rates by 25bp in June and then again in September."
"Ultimately, for the ECB to raise rates, we believe the Governing Council will want to see the shock is causing persistently higher inflation, as in 2022, or that the shock meaningfully raises inflation expectations. In order to assess this, we believe sufficient time will be needed, and therefore June is likely to be the first meeting at which the ECB could raise rates if it decided to in response to the Iran war."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Prospects for the opening of the Hormuz Strait are overshadowed, Asian bonds under pressure: 2Y Japanese bond yield approaches 2%, 3Y Korean bond yield rises to highest level since 2022
With high oil prices, short-term bond yields in South Korea and Japan have risen.
5% US Treasury pressure weighs on global assets, while Australian government bonds open up a window for allocation? Fixed income giant Pimco calls the rate hike expectations too aggressive
Pacific Investment Management Company (Pimco) holds a constructive view on Australian bonds, believing that market expectations for rate hikes are too high. Pimco stated that the rate hike cycle in Australia has been "fully priced in," and cracks are beginning to appear in the economy, making Australian bonds look attractive, especially in the 5- to 10-year segment of the yield curve.
Only a few stocks are rising! Goldman Sachs warns: US stock market breadth hits the worst level since the 2000 internet bubble, with rare divergence in bond volatility
Flood, a Goldman Sachs partner, believes that leading AI companies are propping up the market indexes, while median stocks have fallen 16% from their highs. More unusually, Garrett, the head of derivatives trading at Goldman Sachs, warns that the bond volatility MOVE index is at an extremely high percentile, yet the VIX remains subdued. Jonathan Krinsky, a strategist at BTIG, points out that while total hedge fund leverage is rising, net leverage is falling, indicating a contradiction of "increasing exposure without increasing direction," and warns: "Something has to give."
Hyperliquid’s big test: Can institutional demand absorb $100M in whale selling?
Crypto prices
More
