Traders Slash Bets on Half-Point ECB Hike to One-In-Four Chance

Traders are betting Christine Lagarde will pay heed to banking turmoil and not deliver on a promised half-point rate hike when the European Central Bank announces its policy decision Thursday.

(Bloomberg) — Traders are betting Christine Lagarde will pay heed to banking turmoil and not deliver on a promised half-point rate hike when the European Central Bank announces its policy decision Thursday.

Money markets confidently baked in a 50 basis-point hike as recently as a few hours ago on hopes that US bank failures would not continue to roil markets. But a few tough words from Credit Suisse Group AG’s biggest shareholder opposing further cash injections ignited a broader stock selloff and spurred traders to favor a smaller 25 basis-point increase.

ECB President Lagarde said as recently as March 5 that a half-point hike this month was very likely, echoing a number of her colleagues who have argued that policy tightening was necessary to rein in inflation and bring it back toward the central bank’s 2% target. ECB officials are in a quiet period ahead of the meeting, which has increased the uncertainty.

–With assistance from Greg Ritchie.

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