What if the ECB hikes rates straight into a recession?
An ECB hiking into a German contraction is a policy-error stagflation shock: front-end yields up, curve flattens, sell European cyclicals and high-beta — crypto -3% leads only as the highest-beta vent. Rhymes with the ECB's 2011 Trichet hikes into the debt crisis, swiftly reversed, and the 2022 hawkish global repricing. Transmission: tighter euro financial conditions slow growth further; the front end reprices the surprise. Forward angle: hiking with German GDP already shrinking inverts confidence fast, so the cleanest expression is a bull-flattener and a German-cyclical short, not just crypto.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Sticky services inflation forces a surprise rate rise as German GDP contracts, inverting confidence. The trigger decomposes into signed root‑shocks — Fed policy path ▲ · Recession signal ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.