The ECB says it'll 'stay the course' on rate hikes. But it's not clear for how long

European Central Bank President Christine Lagarde has repeatedly utilized the operation "staying the course" erstwhile referring to upcoming complaint decisions, but immoderate marketplace watchers uncertainty the slope volition support its hawkish stance for overmuch longer.

The ECB entered tightening mode past twelvemonth with 4 complaint hikes successful an effort to power precocious ostentation crossed the euro zone. These decisions pushed the main deposit complaint from -0.5% to 2%.

Recent information showed a two-month consecutive driblet successful header inflation, but this is inactive well-above the ECB's 2% target, hence respective comments from ECB officials connected however they request to support raising rates, including Lagarde's "we volition enactment the people to guarantee the timely instrumentality of inflation."

But ECB watchers are asking: for however long?

"Uncertainty is higher connected the ECB's moves aft March, with a fewer hawkish Governing Council members indicating further hikes successful the 2nd quarter," Francesco Maria Di Bella, fixed income strategist astatine UniCredit told CNBC via email.

"The size of those complaint hikes volition beryllium connected the ostentation outlook. Lower terms unit volition astir apt let the ECB to hike by 25 ground points, alternatively than 50, successful May and June," helium added.

ECB Executive Board Member Fabio Panetta reportedly said earlier this week that the cardinal slope should not pre-commit to immoderate circumstantial complaint moves beyond its March meeting.

Markets person priced successful a 50 ground points hike for the adjacent 2 argumentation meetings, 1 of which takes spot adjacent week and the different successful March.

"Panetta's code shows that ECB doves are regrouping, but hawks are inactive firmly successful complaint for astatine slightest the adjacent mates of meetings, for which our basal lawsuit script is 2 50 ground points hikes," Davide Oneglia, manager astatine TS Lombard said successful an email to CNBC.

The ECB, which has been acting arsenic the region's cardinal slope since 1991, has historically been much connected the dovish broadside aft galore years of moribund inflation. But the vigor crisis, strict proviso concatenation issues, among different bottlenecks person driven prices higher crossed the bloc and led to a caller code from the cardinal bank.

A Reuters canvass released earlier this week showed that markets expected the ECB to intermission complaint hikes successful the 2nd 4th erstwhile its deposit complaint is astatine 3.25%.

"How acold the ECB volition really beryllium capable to spell aft March remains to beryllium seen," Oneglia said, adding that "a terminal complaint of 3.50-3.75% seems possible" but the ECB "cannot diverge excessively overmuch for excessively agelong from that of the Fed."

Traders person started considering whether the Federal Reserve mightiness extremity its tightening rhythm successful upcoming meetings aft weaker-than-expected information past week.

"So, if the U.S. entered a much terrible recession than anticipated and/or the Fed were to chopped rates aggressively successful effect to immoderate slowdown, [the] ECB's complaint hikes could halt sooner," helium said.

However, the economical information successful the euro portion seems to beryllium astonishing connected the upside. Flash euro portion composite purchasing managers' scale figures, retired Tuesday, showed affirmative growth.

This lowers the chances that the ECB volition person to extremity oregon adjacent revert its hawkish tone, but analysts bash not deliberation the cardinal slope volition request to support hiking for overmuch longer.

Andrew Kenningham, from Capital Economics, besides told CNBC helium expects different 50 ground points hike successful February and March and past 25 ground constituent increases successful May and June.

"After that we spot the argumentation complaint staying unchanged until the 2nd fractional of 2024," helium added.

One of the aspects to see is however ostentation mightiness easiness further successful the coming months arsenic vigor costs support dropping.

In anticipation of what the ECB volition denote adjacent week, Kenningham said: "The connection volition beryllium hawkish and accent the request to bash spell further and to 'stay the course' without being explicit astir amounts and dates for complaint hikes."