April 1, 2019 / 1:57 PM / 6 months ago

Euro zone money markets start to factor in chance of rate cut this year

LONDON, April 1 (Reuters) - Euro zone money markets were on Monday starting to price in a slight chance of an interest rate cut from the European Central Bank this year in a further sign of the dramatic re-pricing of the rates outlook that has swept through world markets.

Eonia money market futures dated to the ECB’s December 2019 meeting price in just over 1 basis points worth of rate cuts.

Analysts say this is roughly the same as saying the markets price in around a 10 percent chance of a rate cut.

While this is far from fully pricing in a rate cut it is significant in highlighting the scale of the shift in investors expectations of the economic outlook and what that means for European Central Bank policy. Last year Eonia forwards suggested investors were fully pricing in an interest rate hike in 2019.

News last week that the ECB is studying ways to lower the charge that banks pay on some of their excess cash as a possible way to offset the side-effects of its ultra-easy policy sparked a huge rally in money market futures. (Reporting by Dhara Ranasinghe, Editing by Abhinav Ramnarayan)

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