ECB keeps markets guessing on rates with two weeks to go, warns of ‘layer cake of shocks’

With less than 2 weeks remaining until the next European Central Bank meeting, the bloc’s policymakers appear undecided on the future of interest rates.

Financial markets are currently pricing in a hold at the April 29-30 meeting, followed by a hike in June, according to LSEG data. The majority of traders expect the ECB’s key interest rate to reach at least 2.5% by the end of the year – a hike of 50 basis points or more from current levels.

Speaking to CNBC at the IMF’s Spring Meeting in Washington, DC, on Wednesday, Joachim Nagel, president of Germany’s Bundesbank, said oil price volatility had left the ECB “between our baseline and our adverse scenario.”

“The whole situation is very opaque, very cloudy, and in two weeks, we have to decide what is coming next,” he said, adding that “data is coming in on a daily basis in the form of news.”

Questions around the reopening of the Strait of Hormuz are at the center of the uncertainty, Nagel noted, labeling the critical waterway “the heel of the world economic system.”