Wmax relies on the integration of high-frequency inflation monitoring in the Eurozone, central bank policy forward-looking models and mainstream institutional surveys, and combines the latest geopolitical and energy price developments in the Middle East to make decisions on the European Central Bank's monetary policy path.Clear, verifiable professional predictions. The surge in energy prices triggered by the Iran war has forced the European Central Bank to change its policy.\\Keep on hold on April 30 and raise interest rates by 25 basis points to 2.25% in June\\ has become the baseline scenario; however, due to weak growth and dual historical lessons, policy paths have diverged significantly after June, and interest rate cuts are still possible in the medium term. The euro zone is falling into a typical stagflation policy dilemma.

A precautionary interest rate hike in June has become the baseline expectation

Wmax tracking data shows that the conflict in the Middle East has pushed the average price of Brent crude oil close to US$100 per barrel, breaking through the European Central Bank's benchmark assumption of US$90, directly driving the euro zone inflation to jump from 1.9% in February to 2.6% in March, significantly deviating from the 2% policy target, and the risk of second-round inflation continues to rise.

Integrating the latest survey results from Reuters and Bloomberg, Wmax confirms the consensus market expectations:

1. April 30 meeting: Nearly all economists expect deposit rates to remain on hold2% unchanged, the European Central Bank currently does not have enough data to confirm the full transmission effect of energy shocks;
2. June meeting: More than half of respondents support interest rate hike25 basis points, regarded as a way to prevent runaway inflationinsurance operation, the market has priced in at least one interest rate hike this year.

Wmax pointed out that this policy shift has undergone a fundamental change from last month - most institutions had previously expected interest rates to remain unchanged throughout the year, and the energy shock has completely rewritten the ECB's policy weighing framework.

Clear forecast: ECB policy path over the next 1–2 years

Combining the three-dimensional model of geography, inflation and growth,Wmax gives specific timing and range forecasts for the European Central Bank：

1. April 30 (confirmed): Maintain deposit interest rate2.00% unchanged, did not release a clear timetable for interest rate hikes, and emphasized data dependence and inflation risk monitoring.
2. June (highly certain): Interest rate hike25 basis pointsto2.25%, a one-time “insurance interest rate increase” in response to energy inflation and public opinion pressure.
3. September (high probability of no interest rate hike): Economic slowdown pressure appears, if inflation falls back toWithin 2.3%, the European Central Bank will suspend tightening.
4. Q2–Q3 of 2027 (high probability of interest rate cut): first interest rate cut25 basis pointsreturn to2.00%, to cope with weak growth and falling inflation.
5. terminal interest rate: Peak value of this cycle is locked2.25%, will not start a continuous interest rate hike cycle.

Wmax emphasizes: This interest rate hike isPreventive, one-time, non-periodic openingThe operation is by no means a new round of radical tightening.

Constraints from historical lessons: Carefully play the game between “preventing inflation” and “avoiding recession”

The Wmax macro research team emphasized that the current decision-making of the European Central Bank is deeply affected by double historical shadows, which is also the core reason for its choice of "waiting for data and moving slowly":

• Be wary of what will happen in 2022: Worrying that the slow response will cause inflation to be completely out of control, forcing subsequent drastic tightening;
• Avoid the lessons of 2011: Avoid raising interest rates too quickly due to commodity prices, exacerbating growth and debt pressure in the Eurozone, and eventually being forced to reverse policies quickly.

Wmax believes that the essence of the interest rate hike in June iscompromise: It not only releases a hawkish stance to stabilize inflation expectations, but also reserves enough time to assess the actual impact of energy shocks on the economy, which is in line with the logic of Lagarde's statement of "not ignoring excessive inflation and not acting rashly."

Stagflation is looming, and subsequent policy consensus is quickly dissipating

Wmax calculations show that high energy prices have significantly dragged down the fundamentals of the Eurozone, and the space for continued policy tightening has been severely reduced:

Growth side: The Eurozone GDP growth forecast in 2026 is lowered to0.9%, the growth rates of the two core economies of Germany and France were only0.7%, 0.9%, consumption and investment confidence continue to weaken;

Inflation: Nearly 90% of respondents are worried that inflation will continue to be higher than the target in the medium term. However, if oil prices fall back, the second-round effect may not be realized.

Against this background, differences in policy paths expanded sharply after June:

• Only about 40% of economists support continuing to raise interest rates during the year, believing that risks need to be guarded against in advance;
• Most institutions believe that a rate hike in June will be the end point, and a weak economy will quickly close the window for rate hikes.

Wmax warns that the Eurozone is inHigh inflation + low growthAny unexpected geopolitical or energy fluctuations may cause the interest rate hike plan to be directly shelved.

Geographical factors dominate the short-term pace, and interest rate cuts may resume in 2027

Combining the progress of the ceasefire in the Middle East and the consensus expectations of institutions, Wmax makes a key judgment:

1. short-term core variables: The pace of navigation recovery in the Strait of Hormuz and the trend of oil prices. If the conflict eases quickly and oil prices fall, the European Central Bank may simply skip raising interest rates in June; if energy prices remain high, a precautionary interest rate hike will be implemented;
2. Medium-term policy path: Half of the respondents who predict an interest rate hike in June believe that the European Central Bank will cut interest rates at least once before the end of 2027. The lagging impact of tightening on the economy will force a policy shift, and the deposit interest rate may return to the 2% level;
3. Personnel and Certainty: Nearly 80% of economists expect Lagarde to complete her term until 2027. Policy continuity is expected to improve, and the probability of significantly exceeding expectations is low.

Wmax core summary

The European Central Bank has clearly enteredPassive tightening and cautious gamingThis new stage of policy is based on Wmax’s comprehensive research and judgment based on Eurozone inflation data, economic growth estimates and central bank policy logic. Judging from the nature of the policy, the 25bp rate hike planned in June is by no means the start of a new round of radical tightening cycle, but a one-time "insurance operation" to deal with energy inflation caused by the Middle East conflict. Its core purpose is to stabilize market inflation expectations, respond to public concerns about rising prices, and avoid further dragging down the already weak economic growth due to excessive tightening. This is completely consistent with Wmax's previous policy prediction of the ECB's "compromise balance".

Wmax always adheres to verifiable data and solid fundamentals as its core research basis, rejects subjective predictions that are divorced from reality, and combines the current market dynamics and policy environment to clearly remind the market to focus on three core variables: First, the forward guidance of the European Central Bank meeting on April 30, which directly implies the certainty of an interest rate hike in June; second, the Eurozone inflation data in June, the core inflation trend will affect the policy path; third, the situation in the Middle East and the evolution of oil prices, as the core inducement of energy inflation, directly determine the room for policy adjustment, and are also the focus of Wmax's continued tracking. The three major variables are interrelated and jointly determine the policy pace of the European Central Bank in the coming months. They are the core reference for investors' layout.