Following The ECB's statement, traders have moved rate-hike expectations up to around 150bps by December 2022...
All eyes will now be on what Lagarde says at the press conference as she tries to thread a needle of a fragmenting European bond market, ending bond-buying, and hiking rates into her own stagflationary forecast (lower growth and higher inflation). As Bloomberg Economics' Geoff King points out:
“The most closely scrutinized part of the press conference will be any comments made by Lagarde on the likelihood of a 50 bp interest rate increase instead of a 25 bp move. She has published a roadmap for her preferred course of action and it’s consistent with 25 bp increases in July and September. We don’t expect her message to differ, but she’s changed tack before after inflation surpassed expectations.”
Markets were pricing in the 25 bp increase in July (and about a 40% chance of a 50bp move), and pricing in 25bps hikes for September and December as well as one each quarter thereafter until the main refinancing rate hits 1.5% (the estimate of neutral).