MNI ECB Preview: Goodbye To A Good Place?

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Executive Summary

• The ECB is again fully expected to leave its three key rates on hold on Thursday, including a 2% deposit rate within the 1.75-2.25% neutral rate range estimated by ECB staff.
• The energy price shock from the US-Israel-Iran war sees this meeting in a far different light compared to previous meetings, with 40bp of hikes priced through year-end albeit with a next hike only in July.
• ECB speakers have pushed back on the need for a near-term reaction and indeed there is less than 1bp of a hike priced for this week whilst assessing potential for a sharper push higher in energy prices should Gulf producers have to meaningfully shutter production.
• New macro forecasts should show a marked increase in shorter-term inflation along with a crimping of output growth. The median analyst sees headline inflation at 2.3% (+0.4pp) in 2026 and 2.0% (+0.2pp) in 2027 with core inflation little changed. GDP growth could be revised 0.1pp lower in both 2026 and 2027.
• The cut-off date will be important as it can have notably different implications due to the speed of the energy price adjustment, albeit with some partly offsetting impact from the more hawkish rate backdrop.
• Expect the balance of risks and ECB scenario analysis/sensitivity to see greatest attention in the press conference opening statement and Q&A, leveraging previous scenario work in the event of a Strait of Hormuz closure.
• MNI policy team source reporting expects a stressing of vigilance on the inflation outlook and likely retiring the "good place" guidance. That said, we see risks skewed to the downside for the 40bp of hikes priced to end-2026 in terms of what Lagarde can actually deliver this meeting.

Analyst estimates for March 2026 macroeconomic projections