May 9, 2018 / 7:09 AM / a year ago

Euro zone money markets scale back bets on mid-2019 rate hike from ECB

LONDON, May 9 (Reuters) - Euro zone money markets now price roughly a 75 percent chance of a 10 basis point hike from the European Central Bank by mid-2019, scaling back bets on a rate rise next year given a softening in economic data and inflation numbers.

The difference between the overnight bank-to-bank interest rate for the euro zone (Eonia) and forward Eonia rates dated for the ECB’s June 2019, meeting was 7.5 basis points on Wednesday, down from almost 10 bps two weeks ago.

Analysts say that means investors are pricing in around 75 percent chance of a 10 basis point increase in the ECB’s deposit rate - the minimum it is likely to increase - from minus 0.4 percent currently.

While markets fully anticipate a rate hike by July next year the timing of a rate hike has been pushed back sharply in recent weeks as some data have shown a loss in economic momentum. (Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee)

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