ECB Rate Increase Debate Silenced as Officials Push Back: Chart

It has taken three weeks, and numerous European Central Bank speakers, for the market to completely row back on its expectations for higher interest rates. At the March 9 meeting, President Mario Draghi’s acknowledgment that ECB rate guidance was an “expectation” rather than a commitment prompted investors to prepare for higher rates, pricing in as much as 13 basis points of deposit-rate increases by April 2018, and a full 20 basis points by September 2018. Since then, however, policy makers have struck a more dovish tone, bringing money markets back in line with levels seen before the meeting.