Core UK Inflation Shock Shows the BoE’s Job is Not Yet Done

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Eurozone Market Update

In May, the ECB raised its three key rates by 25 bps, taking the deposit rate to 3.25%, in line with our expectations and those of the market. This ended the jumbo hikes we had seen since the end of 2022. The ECB’s statement was more balanced, maintaining the ”data dependency” language for future decisions. However, it added focus on the transmission of policy, noting ”lags and strength of transmission to the real economy remain uncertain.” Speaking about the previous month’s banking turmoil, ECB President Christine Lagarde stated that European banks still looked resilient but struck a hawkish tone by noting that the ECB had more ground to cover, given the upside risk to inflation.

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