Euro zone investors price in 70 pct chance of ECB rate hike by year end

LONDON, Jan 12 (Reuters) – Euro zone money markets now price in a 70 percent chance of a 10 basis point hike from the European Central Bank by the end of the year, ratcheting up bets on a rate rise in the wake of this week’s hawkish central bank minutes.

The difference between the overnight bank-to-bank interest rate for the euro zone (Eonia) and forward Eonia rates dated for the ECB’s December 19 meeting is around 7 basis points, up from around 5 bps at the start of the week.

Analysts say that means investors are pricing in a 70 percent chance of a 10 bps increase in the ECB’s deposit rate – the minimum it is likely to increase – from minus 0.4 percent.

The ECB should revisit its communication stance in early 2018 and gradually adjust its language to reflect improved growth prospects, the accounts of the bank’s December policy meeting showed on Thursday. (Reporting by Dhara Ranasinghe, Editing by Abhinav Ramnarayan)

Source: Reuters

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