European markets closed sharply lower Monday amid the fallout from the SVB crisis.
Core inflation — the key focus right now for policymakers — accelerated to 5.6% from 5.3%. That is reinforcing expectations that the European Central Bank will have to push borrowing costs ever higher.
"Beyond the near-term evolution of core and underlying inflation, which has yet to peak, the key determinants of the terminal rate – the level of the terminal rate, when it will be reached and how long it will be maintained – are wage growth, the fiscal stance and financial conditions," he said. "We think the ECB will lack the consensus to explicitly commit to another 50bp move in May, given the visible divisions within the Governing Council on next steps," said Paul Hollingsworth, chief European economist at BNP Paribas, in a research note. "Recent comments from council members suggest substantial differences over the extent and pace of future tightening.
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