ECB’s Demarco says policymakers must be patient on rate decisions, but warns an adverse scenario could materialise; adverse scenario could require two rate hikes; longer-term inflation expectations anchored

The comments from ECB’s Demarco highlight the need for patience on rate decisions, indicating that while current inflation expectations are stable, policymakers are preparing for potential adverse scenarios that could necessitate further tightening. This suggests the central bank is balancing its approach carefully, which could maintain pressure on Eurozone yields and influence market positioning in fixed income and currency pairs. Overall, these remarks could indicate a nuanced view on future rate hikes, affecting traders’ expectations in the lead-up to the next ECB meetings.