The ECB and markets are divided over the interest rate expectations

Although ECB officials stated that an interest rate hike in 2022 is 'unlikely', money markets are pricing in a 10 basis point increase in deposit rates in September. Markets diverge from ECB officials for various reasons. The most important of these is the inflation outlook. After the December meeting, Eurozone inflation broke a record with 5 percent and came in higher than expected. Energy costs were effective in the recent increase in inflation. Although ECB officials predict that inflation will slow down, the markets are not convinced yet. Sandra Holdsworth of Aegon Asset Management said: "It's hard for the market to be convinced that the rise in inflation is temporary, the data will be challenging for the next few months. The wait will continue until the March meeting, as markets worried about that the ECB will accelerate the reduction in asset purchases and change its policy, as the Fed did.” Some institutions, such as JP Morgan and UBS, have also brought forward their interest rate hike forecasts in recent weeks. With the continued rise in inflation, some board members also changed their discourse on monetary policy. ECB Governing Council Members Gabriel Makhlouf and Olli Rehn, who generally use dovish rhetoric, stated that the ECB would not remain indifferent to inflation and would take action when necessary.