Institutional analysis: Fed and ECB see policy tightening as long-term job

On January 28, Societe Generale interest rate strategists wrote in a note that both the Fed and the ECB want more reassurance about the downward trend in inflation and see their policy tightening as “a long run, not a long run.” sprint”. Strategists believe the market is not unanimously pricing in a rate hike from the ECB, as they expect the central bank to continue its long run of rate hikes until at least this summer.

With the economy more resilient than expected and inflation stickier, the ECB still needs to raise rates to contain inflation, strategists said. In addition to raising interest rates by 50 basis points in February, strategists expect the ECB to strongly resist market dovishness and over-pricing of rate cuts.