Traders are betting that the ECB and the BoE will have to take bolder action amid surging inflation. As interest rates futures show, for the first time traders began pricing in a 1% rate hike by the ECB at the October meeting from the current 0% level. They also expect the BoE’s interest rate to reach 3.5% by year-end compared with less than 3% 10 days ago.
Traders’ worries were driven by further declines in Russian gas deliveries to Europe and rising energy prices. This could exert heavier pressure on inflation and prompt central banks to act more aggressively to contain consumer price growth. “It is all about energy prices,” said Peter Chatwell, head of global macro strategies trading at Mizuho International Plc.
Higher import bills are weighing on the pound.
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