The market increasingly believes in a new rate hike from the ECB

(Boursier.com) — New increase of 25 basis points? Money markets now assign a 70% probability to an additional tightening by the European Central Bank on Thursday, compared to a 20% probability at the start of the month. The change comes after Reuters reported that the ECB’s new economic projections will show an inflation forecast for 2024 above 3%, strengthening the case for further monetary tightening. The German two-year yield – among the most sensitive to monetary policy – increased by 3.3 basis points to 3.145%, its highest level since mid-August.

“The balance of risks still tilts towards the upside this week,” Francesco Pesole, FX strategist at ING Bank NV, told ‘Bloomberg’.

The ECB began a two-day meeting on Wednesday, the outcome of which was until now very uncertain, in a context of persistent inflation and growing fears of recession. The European Institution has increased its deposit rate from -0.5% to 3.75% over the past 14 months, the fastest rate of monetary tightening in its history. And everything suggests that the cycle is not yet over.