We couldn’t come up with a narrative that has a nice ring to it for today’s ECB meeting. Maybe it’s a too little too late, having missed the bus – something along these lines. In a nutshell, expect a 75bps hike this afternoon. While we expect the pace of rate hikes to be dialed down soon because of the incoming recession, that will not be the message today. Today, we will get more of the chest thumping of ‘front-loading’ rate hikes. Possibly even with a solemn promise to get inflation under control. And the willingness to accept a recession, or not to be distracted by the risk of a recession in the near term, as the price to pay to get inflation down. However, meeting the inflation target is a medium term thing. The medium term is the central banker’s get out of jail free card. No one can define the medium term, let alone know with any certainty what will happen a couple of several years from now (try forecasting six months ahead and you know what we mean). Medium term also means absolving yourself of accomplishing anything in the near term or taking responsibility for policy failures in the recent past. And to anyone expecting the ECB to do something about inflation in the near term: that would require punitive policies that no one is willing to stomach, not even the contingent of hawks.


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