Deutsche Bank on Monday postponed its European Central Bank rate hike forecast to December 2022, with the German lender saying its latest inflation forecast showed the bank’s inflation target would be hit sooner than expected.
German bank analysts expect the ECB to hike rates by 25 basis points as early as December 2022 and no later than June 2023, down from a previous expectation of 10 basis points in December 2023. Although it not a consensus call among analysts, money markets are pricing in nearly two rate hikes from the ECB by the end of 2022.
Deutsche Bank analysts also accelerated the pace of tightening they expected. The deposit rate, currently at -0.50%, will be raised by 25 basis points per quarter until reaching 0.50% in September 2023, they wrote, compared to increases of 10 basis points which reached 0 % in December 2024 before.
Less frequent hikes will follow until the ECB hits a terminal rate of 1% in December 2024, the bank’s analysts wrote, two years ahead of schedule.
Expectations of an earlier rate hike also led analysts to revise their euro forecasts upwards. They now anticipate the euro at 1.15 against the dollar by the end of the year, against 1.08 previously.
Source: Reuters (Reporting by Yoruk Bahceli, editing by Karin Strohecker)