LONDON (Reuters) – The European Central Bank is more likely to raise interest rates by a modest 25 basis points when it meets on Thursday rather than by 50 bps or make no rate hike, Barclays said on Wednesday.
“At the current juncture, we think that the (ECB) Governing Council is more likely to announce an increase of all policy rates by 25bp, which we see as the highest probability outcome, rather than 50bp or no hike, to which we would ascribe lower but equal probabilities,” Barclays said in the note.
Traders’ bets on a large ECB rate hike this week evaporated quickly on Wednesday as a rout in Credit Suisse shares fanned concern about the health of Europe’s banking sector.
Barclays said it assigned a 20% probability to no hike, a 60% probability to a 25 bps hike and a 20% probability to a 50 bps increase.
(Reporting by Dhara Ranasinghe; Editing by Leslie Adler)