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ECB will focus on medium-term inflation expectations

ECB will focus on medium-term inflation expectations | 27 December 2022

27 December 2022, EUR/USD

EURUSD trading plan:

The European Central Bank must be prepared to take the heat and raise interest rates further, including by more than the market expects, if that is needed to bring down inflation, ECB policymaker Isabel Schnabel said. The ECB raised rates for a fourth straight time in December and hinted at further hikes - jolting euro zone bond markets and triggering a backlash from the Italian government. Investors now expect the rate that the ECB pays on bank deposits, currently at 2%, to rise to 3.4% next year. ECB will focus on medium-term inflation expectations, rather than current readings, and saw little risk of raising borrowing costs too far at present given that real interest rates are still very low.

Investment idea: buy 1.0615 and take profit 1.0688.

David Johnson
Analyst of «FreshForex» company
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