Traders and European central bank officials are increasingly divided on the prospects for future rate hikes. Money market expectations have become more hawkish as soaring energy prices have revived concerns about inflation. Therefore, current pricing in the swap market shows that in the next 12 months, the ECB will also raise interest rates four times, 25 basis points each time, while the Bank of England will raise interest rates by the same margin five times. These bets are far from the signals recently released by central bank policymakers. The ECB has raised interest rates for the second time since the outbreak of the war in Iran. Last week, it was once again emphasized that it would not promise the next move in advance; yet, officials already believed at the time that it was too aggressive for the market to bet on raising interest rates three more times. Meanwhile, economists expect the ECB to raise interest rates only one or two more times. On the UK side, the Bank of England has not raised interest rates so far this year. Vice Governor Dave Ramsden said last week that he is satisfied with the current monetary policy stance, but also acknowledged that there are upward risks. The Bank of England will meet on Thursday, and interest rates are expected to remain unchanged. Earlier this year, Governor Andrew Bailey objected to the market's pricing for two rate hikes — which is less than half the number the market is betting on today. Gregoire Pesques, Amundi's Global Fixed Income Chief Investment Officer, said, “Central banks need to be more careful in communicating. There is intense competition for opinions and information in the market, and once a central bank starts sending vague signals, it will pay a very high price.”

Traders and European central bank officials are increasingly divided on the prospects for future rate hikes. Money market expectations have become more hawkish as soaring energy prices have revived concerns about inflation. Therefore, current pricing in the swap market shows that in the next 12 months, the ECB will also raise interest rates four times, 25 basis points each time, while the Bank of England will raise interest rates by the same margin five times. These bets are far from the signals recently released by central bank policymakers. The ECB has raised interest rates for the second time since the outbreak of the war in Iran. Last week, it was once again emphasized that it would not promise the next move in advance; yet, officials already believed at the time that it was too aggressive for the market to bet on raising interest rates three more times. Meanwhile, economists expect the ECB to raise interest rates only one or two more times. On the UK side, the Bank of England has not raised interest rates so far this year. Vice Governor Dave Ramsden said last week that he is satisfied with the current monetary policy stance, but also acknowledged that there are upward risks. The Bank of England will meet on Thursday, and interest rates are expected to remain unchanged. Earlier this year, Governor Andrew Bailey objected to the market's pricing for two rate hikes — which is less than half the number the market is betting on today. Gregoire Pesques, Amundi's Global Fixed Income Chief Investment Officer, said, “Central banks need to be more careful in communicating. There is intense competition for opinions and information in the market, and once a central bank starts sending vague signals, it will pay a very high price.”