BRAZIL: Retail Sales Growth Picks Up In January

SONIA FIX - Source: BBG/ICE

• 1M 4.46340 -0.0011
• 3M 4.43510 0.0041
• 6M 4.32150 0.0072
• 12M 4.17330 0.0174

• MNI: US MBA: MARKET COMPOSITE +2.3% SA THRU FEB 07 WK

Those expecting the ECB to cut rates at projection meetings in H2 2025 may still opt to receive the Jul/Sep/Oct and Oct/Dec/Feb ECB-dated OIS fly’s at current levels (-6bps and -4bps respectively at typing).  

• Current OIS pricing tilts heavily in favour of a front-loaded easing cycle, with ~57bps of cuts priced through June (i.e. 75% implied probability of 3x25bp cuts). If realised, this would bring the deposit rate to the middle of the ECB’s (heavily caveated) neutral range of 1.75 - 2.25%.
• The median terminal rate view of the analysts we track is 2.00%, but a number of forecasts look for cuts to 1.75% and 1.50% (ABN AMRO expect a terminal of 1.00% by 2026).
• It is not possible to rule out a deposit rate below 2%, given sluggish Eurozone domestic demand, tariff risks and ECB confidence in the disinflation outlook. However, the Governing Council will likely need to adopt a more cautious approach to easing below this level, as it assesses the lagged impact of past cuts on economic activity and inflation.
• This should increase focus on projection meetings in H2 2025, with ECB speakers previously highlighting these gatherings as important milestones in assessing the risks to the inflation target.
• For 'projection meeting spreads' (dark blue bars in the below chart), a negative value indicates that more cuts are priced into the projection meeting than the subsequent interim meeting.