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Kazaks Presentation To MNI Briefly Pushes Market To Price 150bp Of ECB Cuts For ‘24


Coverage of a slide presentation made by ECB Governing Council member Kazaks to MNI filtered through to ECB-dated OIS earlier today.

  • He noted that given the current economic outlook and medium-term projection baseline, there is no need for rate cuts in H124. However, he did state that if the outlook changed and the balance of risks for price stability shifts, then the Bank's decisions on interest rates might change.
  • The second half of that point re: the potential for a change in view on interest rates, was read dovishly by markets given Kazaks’ historical hawkish leanings. The overall tone of the comments i.e. it is too soon to discuss cuts, helped limit the move.
  • Kazaks also flagged that “"inflation is moderating from earlier peaks, reflecting the fading impact of previous upward shocks. But the ECB still needs to watch out for domestic price pressures, with profit margins still to soften and a clear peak in wage growth yet to be seen.”
  • A quick reminder that dovish rounds of commentary from ECB’s Schnabel and Villeroy promoted a dovish extension in ECB pricing in recent days.
  • Kazaks’ comments meant that 150bp of rate cuts were briefly priced into ECB-dated OIS through ’24, although that has since moderated to ~145bp.
  • ~19bp of cuts now show for the March ’24 meeting.
  • The strip runs little changed to a couple of bp more hawkish on the day after the pullback from dovish extremes.
  • Psychological levels/rethinking the implied speed of easing (150bp of cuts, which = 6 x 25bp cuts across 8 meetings in ‘24) may have limited the move from developing further.
ECB Meeting€STR ECB-Dated OIS (%)Difference Vs. Current Effective €STR Rate (bp)
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