The 60-day ceasefire in the Middle East has seen oil prices drop close to pre-war levels. This has clearly eased inflation concerns, not just in the market but also among central bank officials.<\/p>\n
ECB officials have been cautious not to sound too dovish, however. Clearly, a hike in July has become unlikely, but the idea of further policy tightening down the road has been kept alive. For one, there are clear risks around the deal in the Middle East and a re-escalation with another spike in energy prices remains a possibility. Secondly, the ECB will still want to monitor how the energy situation percolates through the economy before committing to any path.<\/p>\n
Markets have already made up their minds. A hike in July is off the table, while September looks to be a coin toss. If anything, we think the ECB will act before the end of the year, and looking further along the curve, the market is just shy of fully discounting another hike from the ECB.<\/p>\n
We think the market can maintain its dovish bias for front-end rates if, on average, energy prices stay at benign levels and inflation does not surprise to the upside due to second-round effects. But it will be a slow process, as such risks will be priced out over time as data materialises and ECB officials gradually shift to a more balanced tone. But for now, our economists are keeping a second rate hike in play. <\/p>\n","protected":false},"excerpt":{"rendered":"The 60-day ceasefire in the Middle East has seen oil prices drop close to pre-war levels. This has…\n","protected":false},"author":2,"featured_media":512740,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-512739","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/512739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=512739"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/512739\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/512740"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=512739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=512739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=512739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}