Market Priced In Two More Rate Hikes by ECB and BoE Amid Rising Oil Prices
The European Central Bank (ECB) and Bank of England's interest rate decisions have sparked a wave of market reactions, with traders now pricing in two more rate hikes by each central bank this year. The ECB held its benchmark rate at 2.25% on Thursday, but the pause was seen as leaving room for policy flexibility rather than signaling the end of the tightening cycle.
German bond yields have reached a 15-year high, while UK bond yields are approaching an 18-year high. Brent crude oil has surpassed $100 per barrel again, fueling rising inflation expectations and putting pressure on global bond markets.
ECB President Lagarde stated that there is currently no sign of 'second-round effects' in inflation, but left room for another rate hike in September. This stance reinforced the market's sense of uncertainty around ECB policy paths, further depressing European bond prices.