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Title: German Real Curve Shows Why ECB May Not Be Able To Stop Hiking
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Published: Aug 30, 2023
Author: Mike Rivero
Post Date: 2023-08-30 09:38:31 by Horse
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Views: 32
Authored by Ven Ram, Bloomberg cross-asset strategist, The European Central Bank may have reached a point of hesitancy in its fight against inflation, but real rates suggest that it won’t be able to put a full stop to its tightening just yet. At the heart of the ECB’s efforts will be how much of a restraint its policy rate poses on the economy, with inflation-adjusted rates set by the markets providing the most direct read-out. For instance, inflation-adjusted rates in Germany are only mildly positive as you go further out the curve, in sharp contrast to the US, where the rates are significantly positive. Germany’s two-year bonds are now trading at a premium to where they are indicated on my model, which reflects skepticism that the ECB will go the distance to quell inflation. 
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