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2025-09-16 17:06:27
[Market Pricing Game Under the Shadow of ECB Rate Hikes] ⑴ A delicate tug-of-war is underway between the statements of ECB officials and market pricing. According to Paul Hollingsworth, Head of Developed Markets Economics at BNP Paribas, with improving economic growth, the ECB may initiate a rate hike cycle in the fourth quarter of 2026. This expectation suggests that market participants should closely monitor future economic data for signs of a policy shift. ⑵ Current money market pricing reflects a cautious sentiment, with investors generally believing that the ECB's rate-cutting cycle may be nearing its end. Data shows that, as of now, market pricing reflects only a roughly 10 basis point rate cut by the ECB around March or April 2026. This suggests that the market is skeptical about the scope for further rate cuts and may be starting to price in the possibility of future rate hikes. ⑶ This pricing, combined with officials' statements about possible rate hikes after growth rebounds, paints a complex and uncertain market outlook. While digesting current information, investors must also be wary of potential policy "black swan" events, such as an earlier-than-expected rate hike triggered by an economic recovery that exceeds expectations. This could have a significant impact on eurozone asset prices.
