Policymakers are mulling a slower pace of hikes than previously, according to an ‘ECB sources’ report that says the idea of a slower move in March is ‘gaining support’.
EUR/USD has ticked lower on this and equities have picked up.
Lagarde at the most-recent ECB meeting surprised the market with her hawkish stance, indicating a series of 50 bps hike coming.
Looks like she might be walking that back in short order.
What I fear is that many policymakers are seeing lower inflation now but it’s just a function of energy markets. For Europe, that’s been due to good weather and good weather has a way of not lasting forever.
European stocks are running on this and Italian 10-year yields have dropped.