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Terminal ECB/BoE Rate Expectations Tick Up 4bp

STIR

BoE and ECB terminal rate expectations picked up slightly Tuesday.
Peak ECB rates are seen in Jul/Sep, 150bp from current levels, implying a terminal depo rate of just over 3.50%.

  • That's roughly 4bp higher than Monday's close, with recessionary concerns fading slightly amid better-than-expected data, a theme MNI has been noting recently (Goldman Sachs rescinded their eurozone recession call this morning).
  • ECB pricing for February is 94% for a 50bp vs 25bp hike, with 92.1bp priced through the next 2 meetings (to March).

There's comparably less conviction on a 50bp BoE hike in Feb, with 76% implied probability, and just 77bp priced through the next 2 meetings to March.

  • Terminal BoE rates are seen by Aug 2023 after 109bp of further hikes, like the ECB about 4bp above Monday's close. That implies a Bank Rate of 4.59%.

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