Germany’s 2026 growth forecast has been cut in half, with an increased inflation outlook attributed to the ongoing Iran war. The probability of a 50+ bps ECB rate cut at the April 2026 meeting sits at 0% YES.
Market reaction
With less than a week until the ECB’s April meeting, traders see no chance of a large rate cut. The decision to halve growth forecasts while raising inflation projections points to a shift in ECB priorities from supporting growth to controlling inflation. Related sub-markets show similarly low odds.
Why it matters
Germany’s forecast adjustment, combined with the ECB’s recent decisions, suggests traders expect a more hawkish stance. The ECB already postponed rate cuts in March, and with inflation as the primary concern, a 50+ bps decrease is effectively priced out. Previous eurozone contraction linked to the Middle East crisis reinforces the ECB’s cautious approach.
What to watch
There has been zero trading activity in recent days, and the market’s pricing reflects consensus against significant rate cuts. No face value volume has moved, but the signal is clear: inflation control takes precedence over growth support. Any unexpected geopolitical developments or economic reports before the rate decision could still shift these odds.
Traders should monitor statements from Christine Lagarde and other ECB officials, along with inflation data releases. Geopolitical shifts around the Strait of Hormuz could also affect the bank’s stance.
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