Traders Betting on Three Rates Hike by ECB in 2022

Traders are now expecting three-quarter-points interest rate hikes form the European Central Bank this year, as they expectation grows on record high inflation which will push policy markers to raise interest rates above zero.

Money markets are pricing on 75 basis point increase by the ECB’s December decision, according to swap contracts linked to the euro short-term rate. The move would mark the deposit rate positive for the first time since 2012 from an all-time low of minus 0.5% currently.

Meanwhile, Euro-zero inflation exceeded estimates by surging 7.5% in March from a year ago.

Earlier  Governing Council member Pierre Wunsch said policy rates could be raised above zero before year-end, with the bank perhaps even deploying “restrictive” policy to get surging prices under control.

Additionally, Luis de Guindos and Martins Kazaks said on Wednesday a rate hike in July was possible. Similarly, another policy maker Joachim Nagel said interest rates may be lifted early in the third quarter.