STIR: Hawkish Adjustments In GBP STIRs Surrounding Reeves' Future

The ECB’s June macroeconomic projections will be key in shaping the initial market reaction to Thursday’s policy statement. The statement will likely re-iterate the exceptionally uncertain outlook and the bank’s data-dependent stance, but a weak set of GDP/inflation projections could underscore the Governing Council’s dovish bias heading into H2. See below for a table of analyst expectations for the June projections.

• Real GDP: The main downward growth impact from US tariffs and associated uncertainty is expected in 2026, as the stronger-than-expected Q1 ’25 GDP print provides some offset this year. In 2027, some analysts pencil in upward revisions to account for higher EU/German fiscal spending.
  • RBC and Commerzbank look for a one-tenth downward revision in 2025 to 0.8%, while Natixis see a two tenth upward revision to 1.1%.
  • The range of projections for 2026 is 0.9-1.2%.
  • In 2027, SEB and UBS expect a 1.5% projection on a larger fiscal impulse.
• Headline inflation:  The median analyst expects a two tenth downward revision in 2025 on weaker energy prices and a stronger EUR. The weaker growth expectations in 2026 also feed into lower headline inflation in that year.
  • Three analysts see a three tenth downward revision in 2025 to 2.0%, while Natixis only see a one tenth decline to 2.2%.
  • Several analysts see 2026 inflation revised two tenths lower to 1.7%. A reminder that the MNI Policy Team’s latest sources piece noted that this projection is likely to be either 1.7% or 1.8%.
• Core inflation: The median analyst expects a one tenth downward revision in 2026 relative to March, but no change in 2025 and 2027.
  • Some analysts (e.g. Goldman and Danske at 2.4%) see an upward revision in 2025 due to higher-than-expected spot core inflation pressures since March.
  • Goldman and UBS expect a 1.8% reading in 2026, but a good number of analysts also see a one tenth upward revision to 2.0%.
• A reminder that the ECB will also present a scenario analysis in the June projection round, but it is unclear whether this will feature an alternative set of GDP/inflation projections.
• Note: The June macroeconomic projections are compiled by Eurosystem (i.e. National Central Bank) staff, while March was compiled by ECB staff.

• US MAY FINAL MANUFACTURING PMI 52.0 (52.3 FLASH; 50.2 APRIL)

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