ECB Strip Little Changed

ECB-dated OIS is essentially unchanged today, leaving a couple of bp of tightening priced into the strip, before 50bp of cuts are priced through September ’24.

• Governing Council member Knot’s Wednesday soundbites echoed his recent rhetoric, pointing to the need for restrictive policy to be in place for some time, along with comfort surrounding current policy rate levels (based on the current outlook).
• Governing Council compatriot de Cos noted that he has become more confident re: the trajectory of inflation under current policy settings, although he cautioned that shocks may trigger a different response. He also believes that the market has understood the Bank’s communique “very well,” while stressing that it is premature to discuss interest rate cuts.
• The dovish Centeno characteristically warned against the risks re: overtightening.
• Outside of ECB speak, the latest consumer expectations survey saw the inflation components of the release marked incrementally higher.