Macroeconomics: The Day Ahead for 11 June 2026

A 25 bps rate hike to 2.25% is in the proverbial bag. The question is what will the statement and the press conference signal on the outlook for further hikes. The risks of second round effects on inflation will definitely be talked up, but the ECB will highlight that in contrast to 2022, there is no pent-up consumer demand and that job concerns are considerably higher, per se implying less risk of price-wage spiral. Its updated forecasts will of course see inflation revised higher, and likely remaining above target in the medium-term to signal further tightening, but growth will be revised lower, and unemployment hsaded higher. Last Friday’s downward revision to GDP will be dismissed as being wholly due to the erratic nature of Irish GDP; ex-Ireland GDP was indeed unchanged at 0.2% q/q. The trickier part for the ECB to navigate in communications terms is whether it wants to leave the door open to back to back rate hikes, or merely to retain a tightening bias without offering a timeline or trajectory. Given the uncertain outlook for the Middle East conflicts and timelines for a resumption of more normal energy and raw material flows, it will probably opt for the latter.

Yesterday’s CPI was broadly in line with expectations, but still saw headline inflation at a 3-yr high, and core at 2.9% y/y remaining well above the Fed’s 2.0% target, with weak auto prices, a reversal of much of last month’s govt shutdown related jump in housing offsetting upward pressure from gasoline and airfares, allowing Services CPI to ease back to 0.3% m/m after a 0.6% m/m surge in April. By contrast today’s PPI is likely to highlight persistent pipeline pressures, with headline seen at 0.7% m/m 6.4% y/y, and core at 0.5% m/m and 5.4% y/y. Energy will be the key driver, with some easing in Trade Services PPI after 2.7% m/m jump in April, but still remaining around 1.0%, along with a slower increase in Transport/Warehousing, and the rebound in equities will likely see an acceleration in Portfolio Management Fees after declining in April. The key question is how hawkish the Fed’s messaging will be at next week’s meeting, and indeed how much dissent will there be.