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.
“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.
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.