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Traders Bet the ECB Will Lift Policy Rate Above Zero by Year-End

  • Money markets ramp up bets after hawkish policy comments
  • ‘Everything is possible now,’ says Commerzbank’s Rieger
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WATCH: European Central Bank President Christine Lagarde says the war in Ukraine has increased the risk of inflation.Source: Bloomberg
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Traders are betting the European Central Bank will raise rates above zero this year for the first time since 2012, after a string of hawkish comments from policy makers spurred speculation the bank is priming the market for faster-than-expected monetary tightening.

Money markets are pricing 75 basis points of interest-rate hikes by the ECB’s December decision, according to swap contracts linked to the euro short-term rate. That’s up from less than one quarter-point increase expected at the start of the year. The ECB’s deposit rate is currently at a record low of minus 0.5%.