Market lowers ECB rate hike expectations amid falling oil prices

Market expectations for additional European Central Bank (ECB) rate hikes are diminishing as falling oil prices ease concerns about prolonged inflation. The market is now reflecting the possibility that the ECB will not raise rates by another 25 basis points (bp) by the end of the year. Just two weeks ago, the market had anticipated that the policy rate would reach 2.5% by year-end, following an increase in the deposit rate to 2.25%. Analysts attribute the weakened expectations for further rate hikes to the recent drop in oil prices.