ECB Policy Focuses on Growth Risks Over Inflation Concerns

Asset management firm Algebris Investments' global credit portfolio manager, Gabriele Foa, stated in a report that European Central Bank (ECB) policymakers are likely to prioritize growth risks over inflation concerns in their policy decisions on Thursday. According to Jin10, Foa highlighted that data across Europe continues to show weakness, contrasting with the more resilient growth momentum in the United States and the United Kingdom. Despite the growth risks, the market has priced in more than two rate hikes by the ECB by the end of 2026, with expectations set at 66 basis points, based on data from the London Stock Exchange Group. Foa noted, "Growth expectations are being revised downward, although the extent of the revision is not significant relative to the potential downside risks." He also mentioned that the market is unlikely to tolerate further fiscal slippage without demanding higher compensation at the long end of the yield curve.