(Reuters) – J.P.Morgan said on Wednesday it now expects the European Central Bank to pause its tightening cycle in September as euro zone business activity contracted much more than expected, pointing to deepening pain for the bloc’s stumbling economy.
The Wall Street bank expects a final 25 basis point hike to now come in October, instead of September, as it predicted earlier.
Traders now price in a roughly 40% chance of a 25 bps move in September, down from a more than 50% chance they saw only on Tuesday.
They also scaled back bets on further hikes for the rest of the year but still see a just-under-60% chance of a 25 bps hike by December, which will put the ECB’s deposit rate at 4%.
(Reporting by Susan Mathew in Bengaluru; Editing by Savio D’Souza)