Markets bet on two ECB rate cuts by June as inflation expectations collapse

LONDON, March 9 (Reuters) – Euro zone money markets ramped up their bets on rate cuts from the European Central Bank on Monday as inflation expectations in the region collapsed.

A crash in oil prices added to recessionary fears due to the spread of coronavirus. That sent euro zone inflation expectations plunging below 1% for the first time ever , far below the ECB’s close to but below 2% target.

Money markets are now pricing in a full probability of 20 basis points worth of rate cuts – or two full rate cuts of 10 bps each – by the bank’s June meeting, Eonia futures showed .

Last week markets fully priced in one 10 bps rate cut by June.

The ECB meets on Thursday and markets are positioned for a 10 bps rate cut to help shore up the economy and inflation. (Reporting by Yoruk Bahceli and Dhara Ranasinghe)

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