"Unless the ECB sees the inflation outlook significantly different than one week ago, anything but a 50 basis point move would be a big mistake and hurt credibility," Danske Bank economist Piet Haines Christiansen said.
This outlook is so worrying that prior to the turmoil in the banking sector, a long list of policymakers had advocated rate hikes continuing beyond March.the ECB's resolve and have dialled back bets on the size of Thursday's move and subsequent rate hikes. Money market pricing suggests that investors now see just a 40-45% chance of a 50 bps increase, down from 100% last week but still above the 20% priced at one point on Wednesday.
The peak ECB rate, also known as terminal rate, is now seen at around 3.25%, down from 4.1% last week, an exceptional reversal in market pricing.
Will the ECB blink before the FED ?
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