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.

This article was originally published by Fxstreet.com.Read the original article here.

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