ECB rate hike bets are now close to fully priced before Thursday's policy decision. MarketWatch reported that markets were assigning a 97% chance to a quarter-point increase, with a smaller chance of a half-point move.
That would mark a sharp turn in Europe's monetary-policy story. The ECB is no longer only debating when inflation returns to target; it is now debating whether energy shock risk requires more tightening.
What happened
MarketWatch said traders expect a 0.25-point hike this week and that some economists warn the move could be a mistake if growth is weakening. Morningstar also said futures markets were pricing in a highly likely June hike after eurozone inflation rose in May.
Why ECB rate hike bets matter
The primary keyword is ECB rate hike bets because the market has moved from possibility to near-certainty. That affects the euro, European bank stocks, bond yields and global comparisons with the Fed and Bank of England.
Market impact
Morningstar said eurozone inflation rose to 3.2% in May from 3.0% in April, while core inflation rose to 2.5% from 2.2%. WSJ market coverage showed the 10-year German Bund yield around 3.050% ahead of the decision.
Key numbers
- Market-implied chance of 25-basis-point ECB hike: about 97%, according to MarketWatch.
- Eurozone May inflation: 3.2%, according to Morningstar's summary of preliminary data.
- Core eurozone inflation: 2.5%, up from 2.2%.
- Related Fiscal Wire coverage: /article/eurozone-inflation-jump-revives-ecb-hike-risk
Institution angle
The split is between inflation insurance and growth caution. Some economists argue the ECB should move before expectations drift; others see a policy error if household lending and services activity are already slowing.