• The likelihood of adverse inflation scenario is increasing
• Inflation expectations may shift faster due to memory of price surge after the Russia-Ukraine conflict
• ECB must be ready to act if signs of inflation persistence emerge
• But it is too early to say if a rate hike is needed on 30 April for now
• Inflation expectations are well anchored for the time being, second-round impact not yet visible

The comments lean on the more dovish side as they point towards favouring optionality and flexibility, rather than needing to be proactive about the situation. As things stand, traders are still pricing in ~53% odds of the ECB raising key policy rates at the end of this month.

The mood certainly isn’t helped as oil prices continue to ramp higher, with little optimism that the US-Iran conflict will thaw in the coming week(s).