[ANALYSIS] ECB REVIEW: Largely as expected, with nothing to significantly shift market pricing as we await further data and energy developments

As expected from the ECB. A 25bps hike, and one that would have occurred under all three of the additional scenarios that are set to be published in the near-term. Lagarde said today's decision was unanimous, and that a 25bps hike was a "robust" move under all the additional scenarios; a comment that supported Bunds marginally, on the implied narrative that under none of the scenarios would a 50bps move have been required. On the baseline forecasts, the 2027 & 2028 HICP views were increased, and while this takes 2028 to above the target at 2.1%, the 2027 increase was less than desks expected. For core, this was also upgraded for 2027, though 2028 was reiterated. Note, the new guidance is already outdated given recent price action, and on that point Lagarde highlighted that growth would have been stronger after the cutoff date, though she didn't comment on how inflation would have changed, but more generally said it has been lower than forecast, but is now expected to be longer lasting. In terms of the guidance, the statement stuck to the familiar data-dependent and meeting-by-meeting approach, a point which (alongside the discussed forecasts) potentially supported Bunds on the policy announcement as it disappointed some expectations for a more hawkish guide, given recent price action. Lagarde then stuck to the "framework" language and refused to be drawn on upcoming meetings, taking the pragmatic line that elevated uncertainty removes the merit of guidance. Overall, the decision, statement and press conference do not significantly shift the dial on market pricing, which implies two more 25bps hikes by April 2027. Robust growth, the upgraded 2028 view and Lagarde's comments on the growth backdrop arguably give the ECB policy space to tighten further. Though, the discussed inflation forecasts and her commentary that while elevated inflation will be longer lasting, it has been lower than forecast, factors in favour of the ECB potentially entering an extended hold once they judge they are at a restrictive-enough level; a point Lagarde would not be drawn on in the presser. As such, ECB watchers return to a data-dependent and meeting-by-meeting stance, but the geopolitical backdrop and significant energy upside in recent days mean the bias is clearly a hawkish one, as pricing already suggested.