European Central Bank President Christine Lagarde said that the ECB may continue tightening monetary policy after the March meeting. Meanwhile, she added that the ECB's decisions will depend on new economic data.
"An interest rate hike at the March meeting is very likely, as the ECB intends to return inflation to the target level of 2%," Lagarde said, but did not specify how high the ECB could raise the rate.
Traders adjusted their expectations regarding the peak level of ECB interest rates amid signals of continued high inflation. The swap market assumes that the ECB deposit rate, currently 2.5%, will be raised to 4% by February 2024. About a week ago, the market predicted that the peak rate level - about 3.5% - would be reached in July of this year.
Meanwhile, Goldman Sachs experts have raised their estimate of the ECB's peak interest rate for the second time in a row in a few weeks, saying they now expect it to increase by 50 basis points at the May meeting. The bank believes that by June the interest rate will rise to 3.75%. Previously, the peak rate level was estimated at 3.5%.
February eurozone inflation data, which will be released today at 10:00 GMT, is expected to show a further decline in consumer prices on the back of lower global energy prices and improvements in supply chains. For context: overall inflation fell to 8.6% year-on-year in January from a recent high of 10.6%. Meanwhile, the core CPI (excluding volatile components such as food, energy, alcohol and tobacco products) remains more stable. Consensus suggests that the growth of the overall consumer price index has slowed to 8.2% year-on-year, but core inflation is likely to remain stable at 5.3% per annum. Against this background, the ECB is expected to raise the deposit rate again by 50 basis points in March.