In World Economy News 18/03/2017
Euro zone money markets on Friday showed around an 80 percent chance that the European Central Bank could lift its deposit rate at its December meeting, up from 60 percent a week ago.
Rising expectations of a rate hike at the end of this year followed comments from ECB policymaker Ewald Nowotny, who said the central bank will decide at a later time whether to raise interest rates before or after ending its bond purchase programme.
Forward Eonia bank-to-bank rates dated for the ECB meeting on December 14 stood at around minus 0.27 percent, some 8 basis points above the Eonia spot rate of minus 0.35 percent.
This gap suggests markets are pricing in about an 80 percent chance of a 10 basis point hike in the ECB’s deposit rate by December, just as the central bank’s current bond-buying scheme is scheduled to draw to an end. The ECB’s deposit rate is currently minus 0.40 percent.
Money market rates show a 90 percent chance of a hike in January, and are fully priced for a rise in March.
Source: Reuters (Reporting by Dhara Ranasinghe; Editing by John Geddie)
