Hawkish FT Sources Help Remove Some Of ECB Easing Priced Into ’24, Terminal Rate Ticks Higher

This morning’s hawkish ECB sources piece from the FT leaves ECB-dated OIS little changed to a touch firmer on the day, with the strip steepening.

• Terminal policy rate pricing ticks up to ~4.065% at typing, assuming yesterday’s 25bp hike fully passes through into €STR.
• Elsewhere, the degree of cuts priced into ’24 meetings has seen a slight moderation.
• Comments from ECB President Lagarde and Vice President de Guindos generally stuck to the party lines provided yesterday.
• Elsewhere, comments from Governing Council member Vasle (to BBG), revealed his openness to further hikes if needed, with a particular focus on “much more data” being available come December (suggesting he could have been one of the hawkish sources speaking to the FT), along with a reference to “still high” core inflation. Elsewhere, he noted that current interest rate levels provide the Bank with more space to discuss QT, with the potential for an acceleration of the pace in APP reductions noted.
• Governing Council member Simkus pointed to hope that yesterday’s hike would be the last in the cycle.
• Finally, ECB’s Muller (usually a hawk), played down the need for further rate hikes in the coming months, but couldn’t rule out the need for a further hike if inflation tops expectations.
• Some peripheral Finance Ministers expressed discontent with yesterday’s hike.