Royal London Asset Management analyst Wolfgang Baur said ahead of Thursday's ECB meeting markets largely expect a 25bp hike after June's first move, and the key question is whether that marks the end of a short-lived pre-emptive tightening or the start of a longer hiking cycle. Market clues will come from whether Lagarde stresses energy-driven headline inflation or recent weakness in core and services inflation. Rising long-term government bond yields have already tightened financial conditions

Royal London Asset Management analyst Wolfgang Baur said ahead of Thursday's ECB meeting markets largely expect a 25bp hike after June's first move, and the key question is whether that marks the end of a short-lived pre-emptive tightening or the start of a longer hiking cycle. Market clues will come from whether Lagarde stresses energy-driven headline inflation or recent weakness in core and services inflation. Rising long-term government bond yields have already tightened financial conditions and are carrying much of the ECB's work. Baur said he finds it hard to justify a longer, more aggressive hiking cycle unless inflationary pressures broaden materially.