ECB board member Isabel Schnabel said the central bank may lower rates in June, but should be cautious about further cuts in borrowing costs given uncertainty over the outlook, Japan’s Nikkei newspaper reported.
Traders have priced in 70 basis points of ECB cuts this year – a lot more than the 46 bps of easing priced in for the Fed.
Data this week showed a cooling U.S. consumer price index (CPI), prompting market participants to swiftly price in at least two rate cuts this year. However, Fed officials saying rates may need to stay higher for longer and a report showing a tight labour market have led to another shift in expectations.
Markets are now fully pricing in one cut in November, with a 68% chance of a cut in September – so we are roughly back where we were before the CPI data in terms of U.S. rate expectations.
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Graphics are produced by Reuters.
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