Money markets ease up on aggressive ECB rate hike bets

Euro zone money markets have pared bets on aggressive ECB policy-tightening, positioning on Wednesday for one 10 basis-point rate hike by end-2022 compared to the two increases priced earlier this week.

Eonia money market futures dated to the European Central Bank’s December 2022 meeting see a 100% chance of such a move. At the start of the week, market pricing had pointed to a full 10-basis-point move by July 2022 and two hikes by October 2022.

The pull back in expectations is consistent with a broader recovery in euro zone bond markets, which sold off sharply after ECB chief Christine Lagarde disappointed investors last week by not pushing back more firmly against aggressive market pricing of rate rises next year.

Money markets ease up on aggressive ECB rate hike bets