{"id":1451243,"date":"2024-01-17T14:40:00","date_gmt":"2024-01-17T19:40:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1451243"},"modified":"2024-01-17T14:40:00","modified_gmt":"2024-01-17T19:40:00","slug":"ecb-pricing-gets-a-dose-of-reality-check-all-the-way-from-davos","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/ecb-pricing-gets-a-dose-of-reality-check-all-the-way-from-davos\/1451243\/","title":{"rendered":"ECB Pricing Gets A Dose Of Reality Check All The Way From Davos"},"content":{"rendered":"

ECB Pricing Gets A Dose Of Reality Check All The Way From Davos<\/span><\/p>\n

\n

By Ven Ram, Bloomberg Markets Live reporter and strategist<\/em><\/p>\n

Market pricing of a rate cut from the European Central Bank as early as March has withered since the start of the new year. Now, officials seem to be questioning even the notion of a reduction in April \u2014 highlighting another pocket of possible mispricing. Also at peril may be traders\u2019 estimate of how low the ECB\u2019s benchmark rate could really go this year.<\/strong><\/p>\n

<\/a><\/p>\n

[ZH: We also note that this is not just an ECB thing… US, UK, and EU rate-cut expectations are tumbling…]<\/em><\/p>\n

<\/a><\/p>\n

The annual World Economic Forum in Davos doesn\u2019t usually stir the markets, but this time around ECB speakers have been pretty vocal in conveying a central message: that when wage inflation in the euro zone is running at 5%+, investors shouldn\u2019t go overboard in pricing aggressive rate cuts.<\/strong><\/em><\/p>\n

Governing Council member Mario Centeno has\u00a0said\u00a0that the ECB should avoid inflation declining below 2%, reiterating his stance for lower rates sooner<\/strong>. Centeno, not the most hawkish of ECB officials, has so far been outnumbered by his colleagues.<\/p>\n

Bundesbank President Joachim Nagel\u00a0told\u00a0Bloomberg Television that any reduction can wait for the summer break<\/strong>, while Austrian central bank Governor Robert Holzmann went further by questioning the very notion of rate cuts this year.<\/strong> You could dismiss both those comments made by arch hawks, but even the more dovish-leaning officials have jawboned the markets regarding the aggressive pricing that sees as many as six cuts this year.<\/p>\n

ECB Chief Economist Philip Lane warned that reductions that are too quick tend to stoke a new wave of inflation, putting policymakers in \u201ca far worse scenario\u201d.<\/strong> Lane also made a number of pertinent observations, including that wages have been growing well above the long-run\u00a0equilibrium rate\u00a0and that key Eurostat national accounts data would be available in time for the central bank\u2019s rate meeting in June. If a dovish member of the ECB is himself alluding to June, it may be worth pondering whether an April cut \u2014 which even now is fully priced \u2014 should be a central scenario.<\/p>\n

His colleague\u00a0Madis Muller\u00a0went as far as to question the markets\u2019 pricing 150 basis points of reduction this year, citing stubborn wage inflation. <\/strong>While euro-zone interest-rate traders have already calibrated their bets for rate cuts this year, it clearly looks like there is more to come.<\/p>\n

As I write this, ECB President Christine Lagarde is telling Francine Lacqua much the same thing and is concerned about the second-round effects of wage inflation. Lagarde sent traders scrambling to adjust rate-cut bets, saying aggressive pricing on ECB easing wasn\u2019t helping in the battle against inflation. She did say it\u2019s \u201clikely\u201d the ECB will lower rates by or in the summer.<\/p>\n

\u201cIt is not helping our fight against inflation, if the anticipation is such that they are way too high compared with what\u2019s likely to happen,\u201d<\/strong><\/em> Lagarde said.<\/p>\n

All this is clearly not the news that the markets were positioned for at the start of the year.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nWed, 01\/17\/2024 – 09:40<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

ECB Pricing Gets A Dose Of Reality Check All The Way From Davos By Ven Ram, Bloomberg Markets Live reporter and strategist Market pricing of…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-1451243","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pbimBl-65x9","jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1451243","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1451243"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1451243\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1451243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1451243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1451243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}