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2 Further ECB Hikes Not Quite Fully Priced

STIR

Tuesday will see a deluge of ECB speak (potential comments from Lane, Schnabel, Rehn, Villeroy, Centeno, Vasle, Vujcic & Herodotou), with the ECB-dated OIS strip a touch higher than the levels observed in lieu of last week’s monetary policy decision, aided by the U.S. NFP print, the edge coming off (albeit nowhere near full removal) of U.S. regional bank sector worry and caution re: inflation from within the ECB’s Governing Council.

  • The most prominent round of inflation worry probably came yesterday evening, via chief economist Lane, who noted that there is still “a lot of momentum” in inflation, albeit with a hat tip to the disinflation expected later in ’23.
  • Meanwhile, the weekend saw ECB’s Knot, who has a more hawkish leaning than Lane, point to more rate hikes owing to the high level of core inflation.
  • €STR ECB-dated OIS ascribes a ~90% chance of a 25bp hike at next month’s meeting, with a further ~22bp of cumulative rate hikes priced through September, for a terminal rate of just below 3.60% in €STR terms, or ~3.80% in ECB deposit rate terms.
ECB Meeting€STR ECB-Dated OIS (%)
Jun-233.365
Jul-233.517
Sep-233.585
Oct-233.567
Dec-233.507
Feb-243.427
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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