ECB Pricing Still Unwilling To Breach Full Pricing For 2 Further Hikes

The previously alluded to ”significant” move higher in the latest ECB consumer inflation expectations survey has allowed ECB-dated OIS to firm, with the market now pricing in 47bp of further hikes.

• This helped more than unwind any lingering reaction to Villeroy’s comments, made late yesterday, after he pointed to a “marginal” distance left to cover when it came to rate hikes (he has previously stressed that the bulk of the tightening cycle is in the rear-view).
• Elsewhere, Nagel fortified his position at the hawkish end of the ECB spectrum in comments presented this morning, stressing that no options are off the table re: the Bank’s September meeting and stressing the need for action over the 2 meetings before then (after seemingly providing some incrementally softer tones yesterday).
• Still, markets remain reluctant to fully price two further 25bp hikes from prevailing levels, even in lieu of Nagel’s comments and yesterday’s hawkish BBG sources piece (which pointed to some Governing Council-level interest in 3 further 25bp hikes from current levels).
• Beyond there, just under 20bp of cuts (from current terminal pricing) are priced come the end of the Bank’s February meeting, which, although is off the recent extremes, comes despite some explicit ECB pushback against this idea in recent days.

Source: MNI - Market News/Bloomberg