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ABN Amro Ups ECB And Fed Hike Calls, Though Below Peak Market Pricing

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ABNAmro now sees a higher peak in both Eurozone and US policy rates:

  • Citing a more hawkish tilt to communications and unexpectedly GDP and inflation data, ABN now sees a 2.50% peak ECB depo rate by the end of 1Q 2023, with cuts starting in 4Q 2023. Previously they'd seen a 2.00% peak in December 2022.
  • Given persistently strong US labor market data, and any dovish communication likely to have to wait until later in 2023, ABN has also added 50bp to their Fed hiking path, with 25bp hikes in Feb and Mar added to their existing 50bp expectation for Dec, getting the funds rate to 4.75-5.00%.
  • Alongside a sharper rise in Fed hikes than they'd previously seen, they also expect a steeper path of cuts: 125bp in 2023, starting in September 2023, vs 100bp starting in July as previously seen. They see the Fed cutting to 2.25-2.50% by mid-2024.
  • Both peak views are below market pricing (3.00% ECB, 5.00-5.25% Fed), while their cutting views are more aggressive than the market's as well.
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ABNAmro now sees a higher peak in both Eurozone and US policy rates:

  • Citing a more hawkish tilt to communications and unexpectedly GDP and inflation data, ABN now sees a 2.50% peak ECB depo rate by the end of 1Q 2023, with cuts starting in 4Q 2023. Previously they'd seen a 2.00% peak in December 2022.
  • Given persistently strong US labor market data, and any dovish communication likely to have to wait until later in 2023, ABN has also added 50bp to their Fed hiking path, with 25bp hikes in Feb and Mar added to their existing 50bp expectation for Dec, getting the funds rate to 4.75-5.00%.
  • Alongside a sharper rise in Fed hikes than they'd previously seen, they also expect a steeper path of cuts: 125bp in 2023, starting in September 2023, vs 100bp starting in July as previously seen. They see the Fed cutting to 2.25-2.50% by mid-2024.
  • Both peak views are below market pricing (3.00% ECB, 5.00-5.25% Fed), while their cutting views are more aggressive than the market's as well.