(Corrects headline to say 2026, not 2006 outlook)
May 1 (Reuters) – Standard Chartered said it expects the European Central Bank to deliver a 25-basis-point rate hike in June, having previously projected no rate cuts through 2026, following hawkish remarks from policymakers.
The British brokerage cautioned that its call was “not a done deal” and could change depending on upcoming economic data.
“We think a rate hike in June is now more likely than not, but we also see a realistic scenario where the next six weeks of data prompt a continued pause from the Governing Council,” StanChart said in a note on Thursday.
The ECB kept its key rates unchanged at 2.00% on Thursday but indicated that borrowing costs could rise as early as June as it steps up efforts to rein in surging inflation, which could intensify unless the Iran conflict is resolved swiftly.
Policymakers speaking to Reuters on condition of anonymity said they were likely to raise interest rates at least twice, starting in June, unless a peace deal is reached and energy prices ease.
Several global brokerages, including Goldman Sachs and J.P. Morgan, reiterated their forecasts of two rate hikes this year, beginning in June.
Money markets are betting on a 75% probability of a ECB rate hike in June, per data compiled by LSEG.
Over the longer term, StanChart said it expects rates to fall back to 2.00% by mid-2027 as inflation pressure eases once the impact of energy prices fades.
The Bank of Japan, the U.S. Federal Reserve, the Bank of Canada and the Bank of England have all left rates unchanged this week, while expressing concerns over price growth.
(Reporting by Kanishka Ajmera in Bengaluru; Editing by Sumana Nandy)
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