ECB policymakers begin to consider a slower pace of interest rate hikes

ECB monetary policy makers They are beginning to consider a slower pace of interest rate hikes after a likely 50 basis point hike in February, ECB sources tell Bloomberg.

“The energy-driven rapid decline in headline inflation is giving the ECB a breather, but policymakers will remain focused for now on lingering core pressures. If, as we expect, core inflation starts to ease from the end in the first quarter, this could be enough for the ECB to slow the rate of hikes to 25 basis points in March, possibly extending the cycle into the second quarter,” Bloomberg reported.

However, President Christine Lagarde indicated a higher than indicated rate of tightening in December, setting the stage for a move to 50 basis points in February. However, the prospect of a minor 25 point rise at the next meeting in March now has traction in the markets, despite officials saying today that no decision has been made, and that policy makers can still give the half-point step for the March meeting that Lagarde noted on December 15.

The ECB spokesman declined to comment on further action by the Governing Council.

EUR/USD Update

Meanwhile, the Euro is under pressure on Tuesday, falling from a high of 1.0869 to a fresh low of 1.0786 in a move signified in previous analysis as follows:

The W pattern was considered a reversal formation and price was expected to fall on the upside momentum for a restest of the previous structure, if not all the way to the neckline:

The euro is under pressure and looking for bearish targets as money markets ease longer-term tightening bets, putting the odds of a similarly sized 25 basis point rise in March at around 70%.

Weaker-than-expected inflation in the eurozone, a drop in natural gas prices and the prospect of a softer tightening by the US Federal Reserve have reassured ECB policymakers .