PRIMER: Account of ECB's 4th May meeting due to be released at 12:30BST/07:30EDT

Analysis details (08:11)

As expected, the ECB stepped down to a 25bps cadence of rate hikes from the 50bps unveiled in March. The decision to implement further tightening was based on the Governing Council’s judgement that the "inflation outlook continues to be too high for too long". The smaller increment of tightening was likely amid concerns that "past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain". Moving forward, future "decisions will ensure that the policy rates will be brought to levels sufficiently restrictive...". The main surprise from the announcement came via the balance sheet, where the GC now expects to discontinue the reinvestments under the APP as of July 2023. Some observed that the decision on the balance sheet could have been part of a compromise between the doves and the hawks, with the latter favouring a 50bps hike or a potentially more aggressive rate path going forward, something which President Lagarde later denied. However, sourced reports later suggested that there was a deal involved, but the hawks apparently gave up on a 50bps hike without much of a fight. At her follow-up press conference, Lagarde stated that the policy decisions were not to be read as a "pause", and the ECB still had "more ground to cover", giving the announcement a more hawkish skew than the initial policy statement. In terms of the balance of views on the GC, Lagarde said that the decision was not unanimous, with some members preferring a 50bps adjustment. However, no members argued for an unchanged outing. Looking beyond May, Lagarde said she does not have an exact number for what "restrictive" will mean for the ECB with regards to the terminal rate, however, she judges the Bank will know when it gets there. The sources later revealed that some policymakers see two-to-three hikes ahead. As always, the account of the meeting will be deemed as stale to some. Furthermore, with a June hike fully priced in and the Bank in data dependent-mode, it's hard to see what, if anything, the account can reveal to help shape expectations for policy after next month's meeting.

01 Jun 2023 - 08:10- Fixed IncomeResearch Sheet- Source: Newsquawk