PRIMER: Account of the ECB’s December meeting due to be released Thursday 19th January at 12:30GMT/07:30EST

As expected, the ECB stepped back from its 75bps cadence of rate hikes and opted to raise its key three rates by 50bps a piece. Furthermore, the Governing Council judged that "interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive". On the balance sheet, from the beginning of March 2023 onwards, the APP portfolio will decline at an average pace of EUR 15bln per month until the end of Q2 with its subsequent pace to be determined over time. The accompanying macro projections saw 2022 HICP upgraded to 8.4% from 8.1%, 2023 raised to 6.3% from 5.5%, with 2024 and 2025 seen at 3.4% and 2.3% respectively. On the growth front, 2022 GDP was upgraded to 3.4% from 3.1% and 2023 is seen at just 0.5% (prev. 0.9%), with the upcoming recession likely to be shallow and short-lived. At the follow-up press conference, Lagarde noted that info predicates a 50bps hike at the next meeting, "possibly the next one as well and possibly thereafter". In terms of the unanimity of the Board, Lagarde stated that there was a very broad majority view that the ECB should show perseverance. However, some wanted to do a bit more and some a bit less. Later, sources showed that over a third of ECB policymakers wanted to opt for a larger 75bps hike. Any further colour on what compromise was made to get the hawks on board with the smaller 50bps hike will be noted by the market. That said, market participants will likely place greater emphasis on recent commentary from officials given the December CPI report which showed a cooling in headline inflation to 9.2% from 10.1%, whilst the super core rose to 5.2% from 5.0% and therefore had prompted the discussion that although the headline may well have peaked, the core rate might prove to be stickier. It is worth noting source reporting earlier this week suggested that the ECB could look to step down to a 25bps increment of rate hikes by March. However, this flies in the face of guidance from Lagarde at the December meeting and has been met with pushback from officials at the Bank (e.g. Villeroy and Knot) and therefore, it is hard to see such reporting being verified by the account of the meeting. 

19 Jan 2023 - 08:05- Fixed IncomeData- Source: Newsquawk