• 50 bps rate hike
  • Reaffirming another 50 bps rate hike in the next meeting
  • Reiterate that inflation remains stubbornly high and that ECB is committed to fighting that
  • Repeat that policy path remains very much data-dependent

If there is a checklist for the ECB policy decision and messaging today, the above four points will likely be it.

That points to quite a straightforward one in terms of what we are all expecting but there might be some subtle changes to look out for. Let's get straight into it.

For one, another 50 bps rate hike today puts the ECB closer towards a peak in its tightening cycle. While they are likely to repeat another call for a 50 bps rate hike at the next meeting, it is unlikely to see Lagarde commit to anything beyond that - at least not in a firm manner.

As such, expect the ECB to only reaffirm a 50 bps rate hike for March. As for what comes after, that will depend on Lagarde and we are likely to just hear something more vague that offers up some flexibility.

In terms of the statement, we might get a change in wording on this passage potentially:

"In particular, the Governing Council judges that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target. Keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations."

The relief for the ECB in the past few months has been that we saw a less harsh winter in Europe and energy prices have come down from extremely high levels. And even so, core inflation remains high across the region and continues to pose a problem for policymakers coming into today.

But in any case, the fact that we got such a development has granted the ECB more flexibility to be more hawkish as the economy continues to hold up - for now at least.

I think even in the event that we do see a more hawkish communique from Lagarde & co. today, broader markets are likely to be able to take that all in without as much difficulty as it would have been in the past.

We all know that no matter what the ECB says, we are getting closer to a peak in rates - which will see it move towards more restrictive territory. And as soon as that starts showing up on economic data releases, I reckon it would not be surprising to see a quick shift from the ECB to start acting like how the BOE is right now.