ECB: Measured tightening now – more aggressive later

As widely expected , t he ECB announced to end net purchases under its APP program by July 1 st and pre-announced a first 25bp rate hike for the July meeting. The next hike w ill then take place in September, the size of which will depend on the inflation outlook prevailing at that point. We now expect a 50bp hike in September , given that a downward revision of inflation seems to be a necessary condition for a smaller hike in September and such a downward revision looks unlikely. We then expect two more 25 bp hike s this year followed by another 75bp hikes in 2023, implying a total of 200bp hikes from the ECB over the next one-and-a half years .