The ECB is expected to leave interest rates at record low levels during its April 2022 meeting but is generally seen adopting a more hawkish tone. The central bank will likely maintain its pledge for a faster withdrawal of stimulus and eventually setting a clear schedule for ending QE, while reiterating that interest rate increases will only come after the end of the asset purchase programme (APP).
Since its meeting last month, inflationary pressures continued to mount and the war in Ukraine is far from over while further sanctions on Russia, including a potential ban on energy, are expected to continue to pressure prices even higher and slow the economic recovery.
Markets now price in a combined 70 basis points of hikes in the ECB’s minus 0.5% deposit rate this year, according to Reuters. In March, the ECB surprisingly speed up the asset purchase schedule for the coming months and said that the APP could end in the third quarter if the medium-term inflation outlook will not weaken.