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BOE/ECB: Bigger (Implied) Cuts Re-Emerge

STIR

Pricing for future rate cuts re-deepened Thursday after pulling back slightly Wednesday, with futures markets closing in on 100bp of cuts from each of the the imminent ECB/BoE rate peaks.

  • OIS-implied rates suggest 96bp of ECB depo rate cuts over 2024, a new cycle high, and vs 83bp at Monday's close prior to soft US CPI data.
  • Pricing for the first full 25bp cut by the June 2024 meeting remains, with odds of an April cut rising (around 90%, vs around 70% at the start of the week - see chart), and a full 50bp of cumulative cuts implied through the July 2024 meeting.
  • 93bp of BoE cuts are priced in the year following the implied terminal Bank Rate reached in Feb/Mar 2024, 2-3bp from current levels (5.27-5.28%), vs 79bp coming into US CPI day.
  • The first full 25bp cut remains priced by the June MPC, with 50bp through September.
  • That's despite reiteration of the higher-for-longer narrative by the MPC's Greene and Ramsden today.

ECB - Dec '23 vs Apr'24 meeting dated OIS bp changeSource: BBG, MNI

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