Citigroup: It’s too early to bet on the end of the ECB’s rate hike cycle

On March 24, Citigroup interest rate strategist Antoine Gaveau said in a report that as long as the economic situation is stable and inflation uncertainty remains, it will be difficult to digest the early end of the euro zone’s tightening cycle. “The baseline scenario is clearly lower inflation going forward … but that will take time to materialize and we find it hard to imagine the ECB stopping the rate hike cycle unless the downward path (of the economy) is confirmed,” Gaveau said.

In the absence of a worsening financial shock, Citi strategists expect the ECB to raise rates by at least 25 basis points in May and June, with a third rate hike of 25 basis points still a reasonable expectation, “but it feels quite Far away,” Gaveau said.