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ECB, BoE Hike Pricing Bounces Back

STIR

ECB and BoE hike pricing rebounded Wednesday from a sharp drop Tuesday that was triggered by a Bloomberg sources piece pointing to potential for the Governing Council to shift to smaller-than-50bp rate hikes after the February meeting.

  • With ECB's Villeroy appearing to reinforce guidance of 50bp hikes in both the Feb and Mar meetings, ECB terminal rate pricing picked up 3bp today (and up 7bp from Wednesday's low), with 133bp priced to the July meeting implying a 3.33% depo rate.
    • Pricing for the February ECB meeting continues to creep toward 50bp, with 96% probability of that outcome now priced (vs closer to 90% coming into the year).
  • Following an unexpectedly high December UK inflation print, hike pricing for the February 2 meeting shifted up 1.5bp on the session to 46bp. That's the highest implied pricing for Feb seen so far this year.
    • BoE terminal Bank Rate pricing now stands at 4.54%, with 154bp further hikes implied to August - up 7bp on the session.
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