Little Net Movement In ECB-Dated OIS In Wake Of Hawkish BBG Sources Piece

The latest BBG ECB sources piece has been doing the rounds, noting that “European Central Bank officials are starting to accept that interest-rate increases might need to continue in September to bring inflation fully under control.” The piece went on to note that “the ECB’s data-dependent approach means any views on what could happen in four months may easily shift. All the same, some policymakers from across the spectrum of the Governing Council are speculating that two further expected quarter-point hikes might not be sufficient to tame consumer prices, said the people, who declined to be identified because such discussions are private.”

• A quick reminder that ECB President Lagarde didn’t provide anything in the way of firm views on exact levels of tightening required in the Nikkei interview published today, nor at the end of last week’s ECB meeting. However, she did highlight the explicit use of the word “meetings” in the ECB’s post-meeting statement when questioned on the matter during last week’s press conference.
• Markets remain reluctant to fully price in two further 25bp hikes from current levels, with the knee-jerk push higher in ECB-dated OIS in the wake of this article faded, even though it refers to “some policymakers from across the spectrum of the Governing Council” (suggesting that the view may be held by members outside of the ultra-hawkish wing of the ECB).
• As such, the bulk of the modest uptick in ECB pricing has been unwound, leaving terminal rate pricing around the 3.70% mark in ECB deposit rate terms (just below 3.60% in €STR OIS terms), with some stickiness related to the moderation in some of the underlying U.S. CPI readings probably evident.