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BNP Ups Terminal Rate Forecast To 3%; No QT Until Q2

ECB VIEW
BNP Paribas has upped their ECB terminal rate (depo) forecast to 3.00% from 2.00% - to be reached with two more 75bp hikes this year, 50bp more in Feb and 25bp in Mar. That terminal rate is in line with current market pricing, though reached a little earlier (vs mid-2023 market pricing)
  • Core view on QT (by which hey mean "passive" shrinkage of the balance sheet) is that no action takes place before Q2 2023, but they don't rule out decisions being made this year on broad guidelines.
  • They eye risks of Bund yields hitting 3% next year "as the ECB continues to hike rates and a flood of new issuance hits the market".

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