STIR: Bloomberg Sources Re-iterate ECB’s r* Discussions

The latest ECB sources piece from Bloomberg ahead of the open echoed prior reporting from the MNI Policy Team, referencing the growing importance of the neutral rate of interest as policy rates approach 3%. 

• ECB-dated OIS price 61bps of easing through the remainder of this year, implying a 3.14% deposit rate and just under a 50% implied probability of three 25bp rate cuts in 2024.
• Bloomberg sources note that after the first two or three rate cuts, diverging views around the restrictiveness of monetary policy will complicate policymaker’s decisions.
• On August 21, one of the MNI Policy Team’s sources remarked “I expect that we will start discussing hard on r-star at the end of this year as a way to lay the ground for what to expect in 2025”.
• Schnabel and Nagel have also referenced the neutral rate in comments over the past 2 weeks.
• Today’s regional calendar is light, with Bundesbank’s Nagel participating in a discussion at a banking event at 1745BST/1845CET.