JPM: Sources Signals May Reflect More Momentum Behind 50bp Hike

JPM - sticking to their view of a 25bp hike Thursday - on the Reuters ECB sources piece on 50bp hike:

• "While a small number of hawks have said that a 50bp hike should at least be discussed... the Reuters story is likely to reflect more than this, in our view, namely that there is more momentum behind a 50bp hike."
• "Whether it will ultimately be delivered is unclear and we stick with our view of 25bp. But, this call has already only made sense in the context of the ECB’s forward guidance, and the inflexibility it has created, rather than due to anything in the dataflow. In fact, a hike of more than 50bp could be easily justified given the low starting point on rates. And, we think that the story is also significant because of its timing, just two days before the meeting, and the fact that president Lagarde has tried to clamp down on “sources” in the past."
• "The Reuters story may signal a departure" from the tension between "gradualism" on the one hand, vs "optionality, data-dependence and flexibility" on the other. "which would make sense from a policy perspective. But, it is clearly hard to know exactly how much weight to put on it and that the debate is 25bp vs 50bp, rather than more, may still point to some underlying caution."