ECB Rate-Hike Expectations Cool; Market Sees Less Than 25 Basis Points for 2026

According to Jin10 data on June 26, traders have reassessed European Central Bank rate-hike expectations as falling oil prices ease eurozone inflation pressures. For the first time since April, market pricing no longer fully reflects expectations for 25 basis points of hikes through end-2026. Two-year inflation swaps have fallen below 2.2% from above 3% in April, reflecting eased price pressures. Mizuho's strategist Evelyne Gomez-Liechti noted that "market testing of rate-hike expectations is reasonable," though some ECB officials maintain a cautious stance. Economists expect eurozone inflation to slow to 3.1% in June from 3.2% in May, further reducing policy pressure.
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