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Lagarde hinted that the interest rate cut cycle is nearing its end, and the market is no longer fully pricing in another 25 BP rate cut this year.
On June 5, traders cut bets on future interest rate cuts by the European Central Bank and no longer fully priced in expectations for another 25 basis points of rate cuts this year. Money markets were pricing in a further rate cut of just 23 basis points before December, compared to 32 basis points ahead of the ECB’s interest rate decision on Thursday. Short-term bonds led the decline, with the two-year German bunds yield rising as much as 7 basis points to 1.87%. Earlier, ECB President Christine Lagarde said that the central bank’s interest rate cut cycle is nearing its end.