April ECB cheat sheet: Ready, aim, hold in World Economy News 27/04/2026 The European Central Bank will likely keep rates on hold at the 30 April meeting. That’s been hinted at by several Governing Council members lately, who have stressed the lack of new information and the absence of urgency to act. In that sense, April will mainly serve as a reality check for rate expectations, with markets currently pricing around 50bp of tightening by year‑end. In the table below, we outline four scenarios from the most dovish to the most hawkish (with the latter including a surprise hike), and what they would mean for rates and the euro. In our baseline, we expect the ECB to stick to a cautious tone while emphasising that both inflation and growth risks remain material. President Christine Lagarde may not give too much away in the press conference, but we expect she’ll give enough implicit hints that a summer rate hike is a reasonable expectation. Rates expect the ECB to act when needed With just 10% priced in, markets are not expecting the ECB to hike this meeting, but the stakes are higher for June. Over the past weeks, markets have roughly priced in between 20bp and 40bp of hikes by June. Markets are still speculating about the ECB’s reaction function, and any hints about a June move will be taken on board. So far, long-term inflation swaps have remained very stable, reflecting the confidence in the ECB’s inflation targeting. Despite large swings in 2Y inflation swaps, the 5Y5Y inflation forward only bumped up from around 2.08% in February to 2.14%, a minor blip by historical standards. To put this into context, the 5Y5Y rose above 2.6% in 2023. To keep market inflation expectations well-anchored, a hike might be needed eventually if oil stays high or rises further. The big surprise would be the ECB over-delivering compared to market expectations by hiking already at this meeting. The pass-through to longer-dated rates could, however, be limited in this tail risk scenario. If the move were to be packaged in a dovish way, markets would likely interpret the hikes as a front-loading of future tightening and not a radical change in reaction function. In this case, we would see a mild bear flattening of the curve. If, on the other hand, the hike is complemented with a hawkish narrative, we do see the risk of a perceived policy error. The ECB could be seen as pressing the brakes too hard, which could damage market sentiment, weighing on longer-dated rates. In a contrasting scenario where the ECB turns overly dovish, dismissing inflation risks as transitory (without actually using the word “transitory”), we might see a significant steepening of the curve. In this case, 2Y rates might edge lower on fewer rate hike expectations, but the increased long-term inflation expectations would push up rates from 5Y and beyond. Again, not our base case, but still a risk to consider. FX: Surprise needed, or rates stay secondary for EUR/USD The notion that the ECB is responding more hawkishly than the Federal Reserve to the ongoing energy shock underpinned EUR/USD resilience initially, and then helped fuel the de‑escalation rally. The two‑year EUR/USD swap rate differential is now around 20bp tighter than pre‑war levels, and its mostly positive correlation with oil prices suggests markets see EUR front‑end rates as more responsive to fresh escalation risks. That said, while the front‑end rates beta to EUR/USD has recovered after briefly dropping close to zero in Ma