ECB Pricing Softens A Touch

ECB-pricing has eased today, even with bonds on the defensive.

• The liquid contracts on the strip are little changed to 3bp softer.
• That leaves 7bp of tightening showing for this month’s meeting, while a terminal deposit rate of ~3.90% is currently priced.
• ECB chief economist Lane underscored the Bank’s expectations for inflation to ease further through the Autumn, although cautioned re: the degree of wage rises witnessed, along with noting that “this year is really the year, we think, of peak second round” re: inflation.
• Elsewhere, Governing Council member Visco (dove) highlighted the need for caution re: the future path of monetary policy.
• More recently, comments from Executive Board member Schnabel covered the topic of “what is special about climate-related and environmental risks?,” steering clear of meaningful monetary policy matters.
• Last week’s non-committal tones from Schnabel, and a similar offering from President Lagarde on Monday, leave markets tilted in favour of no move at the end of the upcoming meeting, particularly given the recent run of economic activity data.