Danske Research Team expects the ECB to keep the deposit rate at 2.00% and to leave open the option of tightening in summer. It expects 25bp rises in both June and July.
The focus is expected to be on signals from Christine Lagarde, with no commitment to a specific move. The approach is described as “wait and see” for the current meeting.
Expected Inflation And Growth Backdrop
For inflation, the euro area flash April HICP is forecast at 2.9% y/y, up from 2.6% y/y, linked to energy prices. Core inflation is expected to ease to 2.2% y/y, while HICP is also cited at 2.8–2.9% y/y.
Data from Germany and Spain are said to show no change in the monthly momentum of core inflation. The moves are described as “first round” effects from the oil shock.
Euro area flash Q1 GDP is forecast to rise 0.3% q/q. The March unemployment rate is expected to remain at 6.2%.
How The View Shifted By 2026
The article notes it was produced with an AI tool and reviewed by an editor.
Looking back at this time in 2025, we were anticipating the European Central Bank would hold its deposit rate at 2.00% while signaling summer rate hikes. The expectation was driven by an energy price shock, even as core inflation was showing signs of easing. This created a complex situation where the ECB needed to talk tough on inflation without committing to a fixed path.
The trading strategy then was to position for lower short-end swap rates, betting that the negative growth effects from the supply shock would ultimately outweigh the central bank’s tightening bias. Two 25 basis point hikes were fully expected for June and July of 2025, but the market was already looking past them. The play was that the economic slowdown would force the ECB to pause sooner than anticipated.
As of today, April 30, 2026, the situation has evolved significantly from the forecasts made last year. The ECB did indeed deliver those two hikes, bringing the deposit rate to 2.50%, where it has remained for the past nine months. Eurostat’s flash estimate for April 2026 shows headline inflation has cooled to 2.4%, but core inflation remains sticky at 2.7%, proving more persistent than we saw in 2025.
This persistence in core inflation, combined with weak economic data, presents a new challenge for traders. The latest figures show the Euro Area economy grew by only 0.1% in the first quarter of 2026, and the unemployment rate has ticked up to 6.5%. With growth stalling, the market is no longer pricing in hikes but is now focused on the timing of the first rate cut.
Therefore, derivative strategies should shift from betting on the peak of the rate cycle to positioning for the start of an easing cycle. We see value in options on EURIBOR futures that would profit from a rate cut in late 2026 or early 2027. The weak growth and rising unemployment create a strong case for the ECB to consider easing policy, even if core inflation is not yet at its 2% target.
