Frederik Ducrozet, Pictet Wealth Management: A backward-looking ECB could still deliver a 50bp rate hike on Thursday, focusing on sticky core inflation, strong nominal wage growth, and little evidence of financial spillovers from last month’s bank turmoil.

However, a forward-looking ECB should move more cautiously from here, in our view, stepping down to 25bp rate hikes in full data-dependance mode, following three 50bp increases in policy rates so far this year.

Importantly, today’s credit and inflation data look consistent with the view that the ECB’s tighter monetary stance is being transmitted to the real economy, reducing the risks to the inflation outlook.
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