MNI BRIEF:Market Rates Curve Compatible With ECB Target-De Cos

Market pricing indicating a peak European Central Bank rate of around 3.47% “could be seen as compatible with a return of inflation to the 2% target in the medium term” Bank of Spain Governor Pablo Hernandez de Cos told an event on Wednesday.

De Cos pointed to falling gas prices, easing supply chain disruption, euro appreciation and tighter financing conditions as moderating price pressures in comparison with those anticipated in December, though he added that record core inflation was a “powerful reminder” that energy price rises are feeding into the broader economy.

The ECB’s view of risks will be clearer after its March meeting, said de Cos, pointing to key factors including the pass-through of the inflationary shock to core inflation, the euro exchange rate, labour market developments, China’s reopening and the resilience of the euro area economy. (See MNI SOURCES: 100bp Gap Between Hawk-Dove ECB Peak Rates)