ECB’s Deposit Rate To Rise Over One Basis Point Over A Year As Recovery Takes Shape

Source: Bloomberg

Eonia swaps have shown that European Central Bank’s rates will go up by over one basis point in a years’ time.

EURUSD is up 0.16% 

• The rise will be the highest reading in more than two years, further from six months back when the market was set for 10 basis points of easing.
• The change in expectations is fueled by optimism of economic recovery as prices in the region rose the fastest since 2018. It also depicts the fastest path of tightening sounded by the Federal Reserve in the previous week exerting pressure on worldwide rates.
• Previously, ECB’s president Christine Lagarde emphasized the recent price increases as temporary, but now says policy makers have room to reduce rates if need be.
• ECB’s deposit rate has been at 0.5% from September 2019, when the then President Mario Draghi reduced borrowing costs to assist stoke inflation and growth.