January 19, 2023 17:27 GMT
ECB Hike Pricing Well Off Week's Lows; BoE Fades Slightly
ECB hiking expectations were bolstered further from recent lows Thursday on commentary by officials Knot and Lagarde, and hawkishly perceived December meeting minutes.
- Over 140bp of hikes are priced to a July terminal depo rate of 3.40%. That's slightly below the 143bp of hikes priced prior to Bloomberg's dovish sources piece Tuesday, but well above the 126bp at the week's lows.
Conversely BoE hike pricing faded slightly Thursday, with Aug 22 implied pricing falling 1.5bp, pointing to 102bp in further hikes and a 4.52% terminal Bank Rate.
- This was spurred by commentary by BoE Gov Bailey that inflation is set to fall rapidly, and hinting that current market pricing is now more appropriate though he was not "endorsing" 4.50%.
- His full quote from BusinessLive: "If you go back to the height of that period [Sep and Oct], the peak of what the market thought we were going to get to was over 6%, but the time we did our forecast in November it was 5.2%, it is now down to 4.5%. Now I am not endorsing 4.5%, but what you may have noticed in December is that we did not include the comment that we made in November about the market being in our view rather out of line.”
Source: BBG, MNI
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