Traders have revised down the likelihood of an aggressive tightening of monetary policy by the ECB, citing the escalation of tensions between the West and Russia over Ukraine.
Market participants now believe that the ECB will raise the interest rate in December 2022 - this will be the first increase since March 2016. Previously, it was expected that the rate increase would take place in October 2022. The revision of forecasts was related to the news that the Russian president formally recognized Lugansk and Donetsk as Russian-backed separatist-controlled regions in Ukraine and sent troops to the areas to "maintain peace.”
Meanwhile, the eurozone consumer price index rose by 5.1% per annum in January, reaching a record high. Against the background of the fact that inflation is much higher than the ECB's target (2%), a number of ECB policymakers have signaled that a rate hike may occur by the end of this year
According to the forecasts of economists Goldman Sachs Group Inc. and Deutsche Bank AG, the ECB will raise the deposit rate by 0.25% in September and December, as a result of which it will reach 0%.