ECB Hike Expectations Run Ahead of Policymakers' Comfort Zone

Rabobank's Senior Macro Strategist Bas van Geffen notes that EUR money markets now discount more than four additional European Central Bank (ECB) rate hikes beyond the two already delivered, as investors push expectations ahead of policymakers.

He highlights ECB President Lagarde's reluctance to endorse market understanding of the reaction function and cites leaks suggesting any next move is more likely in December than October, tempering front-loaded tightening bets.

Markets expect much more than a one-and-done hike, but the same goes for expectations embedded in curves where central banks have shown a more proactive response.