Marketmind: One central bank drama after another

SYDNEY (Reuters) - A look at the day ahead in European and global markets from Wayne Cole.

So, Jerome Powell found a way to quiet the endless market chatter of a pivot even as he opened the door to smaller hikes.

Clearly the Fed chief doesn't want the bond market to rally so much that it eases U.S. financial conditions while inflation is still running hot. Ironically, the more bonds price in a pivot, the less inclined the Fed will be to give them one.

As a result, May Fed funds have shifted to 5.08% from 4.90% at end of last week, and there's less chance of a cut priced in by late next year. The yield curve bear-flattened and has not been this inverted since the turn of the century.

Now it's time for the Old Lady of Threadneedle Street to enter stage right and do her routine for the cameras. The Monetary Policy Report is out at noon (1200 GMT), followed by a news conference half an hour later streamed live on the Bank of England's website.

Markets are priced for a hike of 75 bps to 3.0%, which amazingly would be the highest since 2008. What happened to the goode olde days of 10%-plus?

Some are tipping 50 bps, but that would risk markets concluding the BoE isn't serious about taming inflation and spooking gilts again. Equally, 100 bps would just fan fears of a much deeper recession and an even bigger budget black hole.

In any event, the BoE is going to have to revise up its CPI forecasts and slash those for GDP, which will make for gloomy viewing compared to the comedy show that is government policy right now.

Other key developments that could influence markets on Thursday:

U.S. initial jobless claims seen at 220K

ISM service sector PMI is forecast at 55.5

Earnings include ConocoPhillips, Kellogg, Starbucks

(Reporting by Wayne Cole; Editing by William Mallard)