ECB preview: A risk-management hike

President Lagarde stated that the ECB would have sufficient data by next week’s meeting to decide whether tighter monetary policy would be required or not. Energy markets are still trading a relatively benign scenario, but the risks to inflation are becoming more skewed. And the potential cost of hiking in error is lower than the loss of credibility if the ECB were to hold and fall behind the curve. Thus, we expect that the ECB will opt for a risk-management hike.