TD Securities says with inflation re-accelerating and energy-driven pressures
likely to spill into core prices and services, the ECB appears poised to raise
rates 25bp to 2.25%. Markets treat a June hike as the start of limited
tightening; the probability of a further move in September is about 65% and
December is fully priced. Given the broadening inflation risk—energy-led
increases feeding services, wages and expectations—TD Securities views this
market pricing as reasonable. If incoming data confirm underlying inflation is
not easing fast enough, a September follow-up is likely.
