Northern Trust Asset Management Monthly Market Commentary – Exclusive Insight for TMI Subscribers
Eurozone Market Update
While leaving interest rates unchanged, the European Central Bank (ECB) was more hawkish than market expectations in reducing Asset Purchase Programme (APP) net purchases sooner, meaning asset purchases could end in Q3. The language on rate hikes also changed from “shortly after” to “sometime after” the net purchases in APP have ended, giving the ECB more flexibility on rate hikes. The ECB forecast also revised economic growth lower due to war in Ukraine and slowing demand, and revised inflation higher as surging energy/commodity prices may pressure other sectors. Investors’ expectations on rate hikes increased through the month, pricing close to a 20 basis points (bps) hike by July (up from 5 bps) and 55 bps by the end of the year (up from 13 bps).