Rate hikes by year-end
- ECB: 71 bps (62% probability of rate hike at the next meeting)
- RBA: 62 bps (71% probability of rate hike at the next meeting)
- RBNZ: 60 bps (94% probability of no change at the next meeting)
- BoE: 55 bps (65% probability of no change at the next meeting)
- BoJ: 53 bps (60% probability of rate hike at the next meeting)
- BoC: 44 bps (98% probability of no change at the next meeting)
- SNB: 29 bps (77% probability of no change at the next meeting)
- Fed: 0 bps (98% probability of no change at the next meeting)
(You can find last week’s market pricing here)
We got a dovish repricing in the first part of the week after Trump seemed to support a WSJ report suggesting he might be open to ending the war with Iran without requiring the Strait of Hormuz to be reopened. Later that same day, Iran’s President also signalled willingness to end the conflict, provided there were guarantees.
The optimism didn’t last long though as Trump disappointed everyone in his address to the nation as he kept a hawkish bias towards Iran and reiterated the 2–3 week timeline for ending the war. That stretches well beyond the current “ceasefire” deadline on April 6, leaving plenty of room for tensions to escalate again.
The hawkish expectations are still driven mainly by inflation fears stemming from higher energy prices, but if this war extends much longer or escalates further, growth and recession worries will likely come into focus.
