ECB Interest Rate Prep

On Thursday the 30th of April at 08:15 ET, the ECB is set to release the results of their latest monetary policy meeting.
Here are some views on what to expect.

General Expectations
Expectation from Analysts and Market Participants forecast the ECB to keep the Interest Rate and unchanged at 2.15% and the deposit rate unchanged at 2%. With the high and low ranges supporting this although the range for the Interest Rate allows for a 25 BP cut.

Investment Bank Commentary
ING
The European Central Bank will likely keep rates on hold at the 30 April meeting. That’s been hinted at by several Governing Council members lately, who have stressed the lack of new information and the absence of urgency to act. In that sense, April will mainly serve as a reality check for rate expectations, with markets currently pricing around 50bp of tightening by year‑end.

In the table below, we outline four scenarios from the most dovish to the most hawkish (with the latter including a surprise hike), and what they would mean for rates and the euro. In our baseline, we expect the ECB to stick to a cautious tone while emphasising that both inflation and growth risks remain material. President Christine Lagarde may not give too much away in the press conference, but we expect she’ll give enough implicit hints that a summer rate hike is a reasonable expectation.

With just 10% priced in, markets are not expecting the ECB to hike this meeting, but the stakes are higher for June. Over the past weeks, markets have roughly priced in between 20bp and 40bp of hikes by June. Markets are still speculating about the ECB’s reaction function, and any hints about a June move will be taken on board.

So far, long-term inflation swaps have remained very stable, reflecting the confidence in the ECB’s inflation targeting. Despite large swings in 2Y inflation swaps, the 5Y5Y inflation forward only bumped up from around 2.08% in February to 2.14%, a minor blip by historical standards. To put this into context, the 5Y5Y rose above 2.6% in 2023. To keep market inflation expectations well-anchored, a hike might be needed eventually if oil stays high or rises further.

The big surprise would be the ECB over-delivering compared to market expectations by hiking already at this meeting. The pass-through to longer-dated rates could, however, be limited in this tail risk scenario. If the move were to be packaged in a dovish way, markets would likely interpret the hikes as a front-loading of future tightening and not a radical change in reaction function. In this case, we would see a mild bear flattening of the curve.

Goldman Sachs
ECB policymakers have made it quite clear that they are valuing optionality as we approach the next policy decision this week. And markets are also listening, paring back on rate hike pricing with odds of such a move now seen at ~20% only. Those odds do jump back up to ~63% by the time we get to the June meeting though. And for the year itself, traders are pricing in ~58 bps of rate hikes for the time being. That translates to about two 25 bps rate hikes to follow and is the base case scenario that Goldman Sachs is eyeing as well.

The firm argues that the ECB will not have much appetite to move this week, considering that Middle East developments remain unresolved. That as policymakers will also want to keep their options open in weighing the second round effects on inflation. “Governing Council members have signalled that they do not need to rush into a decision, and a hold at next week’s meeting is therefore highly likely. That said, the communication has consistently flagged that inflation risks remain to the upside and that the ECB needs to act if signs of inflation persistence emerge.

The tone of the press conference is likely to mirror the recent communication, with President Lagarde noting that the Governing Council will watch for second-round effects and stands ready to act to ensure inflation returns to 2% over the medium-term.”

On future policy steps, Goldman Sachs sees the ECB delivering two 25 bps rate hikes in the months ahead. The first being in June with the next in September, in bringing the deposit rate back to 2.50%.

Wells Fargo
The European Central Bank (ECB) is expected to hold rates at 2.00% at its meeting next week, but the policy debate has turned meaningfully more hawkish against a deteriorating macro mix. Euro area growth momentum has softened materially since the start of the year, with activity indicators now consistent with near stall speed and services increasingly bearing the brunt of the slowdown. At the same time, the energy shock linked to the Middle East conflict has reintroduced persistent inflation risks, with higher oil and gas prices pushing up headline inflation, tightening supply conditions and raising the risk of second round effects through services prices, wages and FX pass‑through. This has shifted the ECB’s characterization of the outlook toward a clearly stagflationary configuration, weaker growth but firmer and more uncertain inflation dynamics.

Against this backdrop, the ECB has moved away from any easing bias and is operating with a lower bar to tightening. March projections marked a clear regime change, with 2026 inflation revised sharply higher, core inflation expected to remain above target through the forecast horizon and policymakers explicitly emphasizing upside inflation asymmetry and credibility risks. While April is likely to be a holding and signaling meeting rather than a decision point, the tone should continue to validate that hikes are live as early as June. Our base case remains for two 25 bps rate hikes this year, beginning in Q2 and taking the deposit rate to 2.50% by end‑2026, with risks skewed toward earlier or additional tightening if energy prices stay elevated or inflation expectations show signs of drifting higher.