Traders are beginning to wonder if the European Central Bank will raise interest rates by more than a full percentage point as growth concerns weigh on expectations of an aggressive policy tightening.
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(Bloomberg) – Traders are starting to wonder if the European Central Bank will raise interest rates by more than a full percentage point as growth concerns weigh on expectations of an aggressive policy tightening.
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Money markets briefly indicated on Tuesday that the ECB would be forced to halt before it hit 100 basis points, against bets for more than 200 basis points in total as recently as July 21. The ECB raised interest rates by 50 basis points last month, the first increase since 2011.
Traders are betting on bets amid fears that excessive tightening could tip the euro zone into a recession. Record inflation and the increased likelihood of a Russian energy cut threaten to inflict a collapse on the 19-member currency bloc.
Loss of confidence in aggressive hikes is giving European government bonds a boost. The yield on the German two-year note, among the most sensitive to rate hikes, fell to 0.17%, its lowest since May 16. .
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