Column-Obstinate ECB suggests 'humility' all around: Mike Dolan
By Mike Dolan
LONDON (Reuters) — 'Pushback' has emerged as one of the financial market words of the year so far, but 'humility' could well take its place.
To varying degrees, top central bankers have this month attempted to dampen what they see as overexcited interest rate cut expectations in markets for 2024. And they've had some success — especially in longer term borrowing rates.
Warned again this week by the International Monetary Fund to «move cautiously» in opening a sluice gate of easing expectations with early rate cuts, Federal Reserve and European Central Bank officials have duly tried to prod markets away from assuming any initial easing before June.
But money markets haven't given up the ghost just yet.
A quarter point Fed cut is more than fully priced by May — with more than a 50% chance of a move in the mix for March — and the first ECB easing is still odds on by April.
All still to play for?
An eye-catching line in the minutes from the December ECB meeting nodded to retaining caution but suggested it may be wise not to rule anything out just yet given the high degree of economic uncertainty still at play.
«It was widely regarded as important not to accommodate market expectations in the post-meeting communication,» the ECB said in a readout ahead of its next meeting next week.
But it added: «Some humility was advised with respect to judging market expectations given prevailing uncertainties.»
While it's unclear whether it was advising humility on its own part or that of market traders, it could possibly be applied to both.
Year-end euphoria after the ECB's Dec. 14 gathering saw the markets scramble to price an ECB rate cut as soon as March, only to face ubiquitous 'pushback' since that's forced them to
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