An ECB hike, but a 2022-style tightening cycle seems unlikely

As expected, the European Central Bank raised rates after the Strait of Hormuz energy shock set off a wave of inflation. But what comes next?

Comparisons with the 2022 hiking cycle are instructive. Inflation was already surging before Russia invaded Ukraine and gas flows were disrupted.

Today, the ECB is hiking from a position of tighter financial conditions, meaning the marginal impact of further hikes may be less pronounced. As for energy, the EU increased its Persian Gulf supply after 2022, but the bloc remains far less reliant on GCC nations today than it was on Russia before the Ukraine war.