TD say that their estimate of inflation for the euro-area through 2023 has been significantly raised. Analysts now expect
- headline inflation at 3.6% y/y in Q4 of this year (the ECB currently project 2.8%)
- core inflation 4.3% for Q4 2023 also
TD analysts add that the entirety of ECB communication at and since its May decision, along with ongoing strong momentum in economic data, suggest to them that the ECB will continue hiking into the summer, reaching a terminal rate of 4.00% by September.
Further out, TD forecasts rate cuts from June 2024, regular 25bp trimmings until ‘neutral’ at 2.0% is hit in 2025.
Current European Central Bank rates: