Highlights:

• At today’s meeting, the ECB’s Governing Council (GC) lifted its key rates by another 50 bps, in line with expectations, and “intends” a further 50 bps hike for March. Thereafter the monetary policy path will be evaluated.
• Starting in March, the APP reduction by € 15 bn per month will be done according to the redemption’s share of each sub-program. Regarding sovereign bonds (PSPP), this principle will also apply to the share of redemptions of each sovereign. Corporate bond reinvestments will be tilted towards greener firms. 
• In the accompanying press conference, President Lagarde again adopted a hawkish tone in our view. She made clear that further hikes would be needed beyond March as there is still “ground to cover” and that rates should be kept at a sufficiently restrictive level to ensure inflation goes back to target. 
• We continue to look for a further 50 bps hike in March, followed by two further 25 bps hikes in Q2, lifting the deposit rate to 3.5%. This is at odds with markets that somewhat scaled down their expectation and see the peak at 3.4%. 
• Markets perceived today’s message as relatively dovish. In a knee-jerk reaction, equities gained, sovereign yields fell, and the EUR declined
   

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