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Danske Bank Expects European Central Bank to Hold Deposit Rate in April Meeting; Summer Hikes to Follow

-- Danske Bank Research expects the European Central Bank to retain the deposit rate at 2% at its April monetary policy meeting but leave the door open for potential rate increases in the summer "to keep inflation expectations anchored."

"Recent communication from the ECB's GC members has indicated that they are in no rush to increase policy rates ... The ECB is likely broadly satisfied with the current market pricing of 65bp worth of hikes this year. Although we do see room for market pricing falling slightly as most recent communication from the ECB's GC members has increasingly mentioned deteriorating growth prospects from higher energy prices," analysts said in a Friday preview note. "For this reason and given the extraordinary uncertainty about the economic outlook we do not expect any pre-commitments to summer hikes."

In June and July, the research firm anticipates that the ECB would raise its key policy rates by 25 basis points, taking the deposit rate up to 2.5%.

The ECB will publish its latest interest rate decision on April 30.

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