European Rate Bets Scrambled as Oil Volatility Grips Markets

Just a month ago, European Central Bank President Christine Lagarde declared that inflation was in a “good place.” With Europe now hurtling toward another energy crisis, traders are struggling to figure out how bad it could get.

At one stage on Monday, markets were pricing as many as two ECB interest rate hikes this year, before traders pared those bets when oil prices retreated from their highs. Driving the rapid fluctuations is uncertainty over how long energy prices will remain high, squeezing households and undercutting growth.