Peter Goves (MFS Investment) | Although the ECB didn’t quite explicitly say “we are at peak”, the change in guidance effectively points in that direction in our view. We likely have rates on hold ahead of us now as opposed to ongoing hikes in our view. In other words, unless there is a decisive change in prevailing data trends, we think the ECB is more or less done. The focus is shifting firmly from the actual level of rates to the duration at which restrictive rates will be in place. This is supportive for core rates. EGB spreads remain relatively resilient, and spreads are tighter on day. This is clearly being interpreted as a dovish meeting.
The growth outlook may have to be revised down further – and Lagarde noted risks are indeed to the downside. Survey indicators continue to point to a downturn and we remain mindful of just how much monetary policy tightening has occurred and is still feeding through to the real economy.