BlackRock is betting that a flagging economy will curb the European Central Bank’s ability to raise interest rates over the next 18 months as soaring food and energy prices squeeze consumers in the euro area.
Faced with record-high inflation, the ECB is on Thursday expected to lay out plans to end eight years of bond-buying and negative interest rates as it charts a course away from coronavirus pandemic-era stimulus policies.
However, investors have gone too far in anticipating a series of aggressive rate increases that would take the ECB’s deposit rate to 2 per cent by the end of 2023, from the current all-time low of minus 0.5 per cent, said Michael Krautzberger, who oversees active fixed income strategies in Europe at the $10tn asset manager.