European Central Bank policy meeting Thursday, 27 July 2023 – preview –

Nomura is anticipating the rate hike from the European Central Bank today to be the final move higher for this cycle, a hike of 25bp for policy rates. The depo rate at 3.75% after this, says Nomura, is to be the terminal rate.

Also expect a strong likelihood that the ECB will alter its guidance to maintain the flexibility of further hikes, if necessary. Despite this, analysts at the bank don’t foresee the ECB promising any additional hikes in advance, and Lagarde will probably emphasize the reliance on data.

  • Looking further out, no hike in September. Nomura says the data by then will not warrant another hike.
  • As for rate cuts, Nomura are expecting Q4 2024 at the earliest.

Nomura add this:

  • We flag that market volatility is likely to be elevated on Thursday and Friday. In particular, the ECB will not have access to Friday’s flash inflation data when meeting. Consequently, we highlight that the ECB’s narrative following the meeting could quickly shift, should country-level inflation data surprise materially in either direction.
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