The European Central Bank is widely expected to raise interest rates on June 11. What happens after that is where the real disagreement begins.
JPMorgan Asset Management and Pictet Asset Management are both calling the anticipated hike a “one and done” move, arguing that the eurozone’s sluggish economy simply cannot absorb a sustained tightening cycle. That puts them squarely at odds with a market that has priced in 75 basis points of total rate increases by year-end.
The case for restraint
The ECB’s deposit facility rate currently sits at 2.00%, unchanged since the central bank’s last meeting on April 30. A 25-basis-point bump would nudge it to 2.25%. JPMorgan AM, which laid out its view on June 7, argues that even this small step may be all the ECB can justify given Europe’s economic trajectory.
Pictet goes further. Along with French asset manager Carmignac, it has suggested the ECB could reasonably hold rates steady altogether, skipping a hike entirely.
