ECB: Rare MonPol Commentary From Elderson, In Line With Peers

The ECB’s Survey of Professional Forecasters (SPF) for Q2 revealed forecasts that were very close to the ECB’s baseline scenario rather than drifting towards the higher inflation/lower growth adverse and severe scenarios outlined at the March projection meeting. 

• Senior ECB members have generally described the developments since that March meeting as being between the baseline and adverse scenario, whilst President Lagarde at last week’s meeting concluded that “we are certainly moving away from the baseline” but wouldn’t be drawn on which outcome was looking more likely.  
• The Q2 SPF survey was conducted between Mar 31 – Apr 8 (when Brent 1st futures averaged $106/bbl compared to today’s $110.5 for example) vs the Mar 11 cut-off date for the March economic projections which saw the quarterly average peaking around $90/bbl in 2Q26. Of course, oil front futures have exceeded $125/bbl in the interim with the situation still highly sensitive to peace talk rhetoric.
• We show inflation and growth forecasts compared to the pre-war Q1 surveys and more importantly the baseline from ECB staff projections below. However, to emphasise how much closer these projections are to the baseline than adverse scenarios, analysts see core HICP inflation at 2.2% in 2026 (baseline 2.3, adverse 2.4, severe 2.6), 2.2% in 2027 (baseline 2.2, adverse 2.7, severe 3.9) and 2.1% in 2027 (baseline 2.1, adverse 2.1, severe 2.9). 

• Headline HICP inflation: 2.7% (1.8% prior, 2.6% ECB staff) in 2026, 2.1% (2.0% prior, 2.0% ECB staff) in 2027 and 2.0% (2.1% prior, 2.1% ECB staff) in 2028.
• Core HICP inflation: 2.2% (2.0% prior, 2.3% in ECB staff) in 2026, 2.2% (2.0% prior, 2.2% ECB staff) in 2027 and 2.1% (2.0% prior, 2.1% ECB staff) in 2028.
• Expectations for the longer term (2030) were again unchanged at 2.0% for both headline and core HICP inflation.
• GDP growth: 1.0% (1.2% prior, ECB staff 0.9%) in 2026, 1.3% (1.4% prior, ECB staff 1.3%) in 2027 and 1.3% (1.3% prior, 1.4% ECB staff) in 2028. 

Germany commissioned more than 2GWh of new battery storage capacity in the first quarter of this year, according to BSW Solar. 

• This was up by around 67% on the year.
• Large battery storage system installations rose by 270% on the year to more than 1GWh in Q1.
• Total battery capacity stood at around 28GWh at the end of Q1. 

Zelenskiy on X: "I had an important conversation with @vonderleyen today. We discussed the European support loan, including the timeline for the first tranche, which will be allocated to the coproduction of drones. We also agreed to move forward actively on a Drone Deal with the European Union and reviewed the details of this prospective security cooperation."

• Note that the EU funding plan update released last week increased borrowing needs by E10bln in each of H1-26 and H2-26. The first disbursement is expected in H1 but we haven't seen any clearer indications on timing or size yet (and not much given away in this tweet).