ECB Pricing Little Changed To A Touch Softer

ECB-dated OIS is little changed to 2bp softer, with an uptick in crude oil futures limiting the move lower in the former.

• A steady 5-6bp of tightening is showing through year end, with a little over 40bp of cuts then priced through September (vs. current terminal rate pricing).
• ECB speak over the last 24 hours has been non-committal re: terminal rate levels.
• ECB Executive Board member Elderson told us “we have said it very clearly: we consider that, with the decisions we’ve made and on the basis of our current assessment, the current interest rate levels will make a substantial contribution to us reaching our inflation target in the medium term. Does that mean policy rates have peaked? Not necessarily. There is still a lot of uncertainty. That’s why we take these decisions meeting by meeting, on a data-dependent basis. Making any predictions about what we will do next would not be consistent with that approach.”
• Late Tuesday saw Holzmann (hawk) note that it’s unclear if the ECB has reached terminal rate levels, as he chose not to exclude the idea of further rate hikes given upside inflation risks and the potential for upside economic surprises. Holzmann also pointed to his preference for a quicker move re: PEPP QT, while noting that he wouldn’t be in favour of outright APP sales.