ECB: Money markets are now pricing two 25 bps rate hikes in 2022

Dhwani Mehta FXStreet

In a committed effort to counter inflation, the European Central Bank (ECB) is now expected to increase the benchmark interest rate to 0% this year, Bloomberg reports, citing the money markets’ expectations.

The bank’s key rate stands at minus 0.5% and has been negative since 2014.

Additional takeaways

“Money markets are now pricing two quarter-point hikes in 2022, compared with smaller than one such increase at the start of the month, according to interest-rate swaps.“

“Traders had first positioned for two 25-basis-point hikes in 2022 following the ECB’s February meeting, only to erase those bets amid concern the war would be a bigger drag on growth.”

The hawkish expectations for the ECB’s tightening were revived after the Fed delivered a hawkish rate hike last week. Meanwhile, the ECB hinted at accelerated reduction of asset purchases at its March 10 policy meeting.

Read: Lagarde speech: Not seeing elements of stagflation now

Market reaction

EUR/USD is moving back and forth around 1.1050, with the Ukraine crisis playing a spoilsport in the pair’s upside momentum. The spot is little changed on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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