LIVE MARKETS-ECB hiking path in a credible escalation scenario

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ECB HIKING PATH IN A CREDIBLE ESCALATION SCENARIO

Peace hopes faded again over the weekend, supporting oil prices above $100 a barrel, while traders fully priced in two ECB rate hikes and more than a 50% chance of a third move this year.

However, analysts at Barclays investigated what would happen to market bets on the ECB’s rate outlook if a credible de-escalation, including the end of the Strait of Hormuz blockade, were to take place.

This backdrop would likely shift the range of policy adjustment being priced for 2026 to one to two hikes, from two to three currently, according to Barclays. Similarly, the June meeting could also reprice closer to 50-50 on such a positive development.

“Overall, the ECB could very well argue that, despite the end of the blockade, full normalisation is likely to take a long time,” Barclays analysts say in a research note.

“Adjusting policy rates by 25-50 basis points could be seen as taking out insurance against second-order effects while still leaving policy rates in the neutral rate zone,” they add.

(Stefano Rebaudo)

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EARLIER ON LIVE MARKETS:

TIME TO INVEST IN DEFENCE? CLICK HERE

IRAN WAR IMPASSE CONTINUES, EUROPEAN STOCKS MIXED CLICK HERE

EUROPE BEFORE THE BELL: PEACE TALKS SUFFER ANOTHER HICCUP CLICK HERE

PEACE PROGRESS STALLS, AI RALLY DOES NOT CLICK HERE


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