Deutsche Bank Downgrades ECB Rate Hike Forecast Amid Energy Risks

Deutsche Bank has revised its forecasts for the European Central Bank (ECB) interest rate hike, citing ongoing energy risks and geopolitical tensions. The bank initially predicted a peak rate of 2.5%, slightly higher than the current ECB deposit rate of 2.25%. However, these assumptions have been challenged by continuing energy price shocks and soft labor market conditions in the eurozone.

The bank now expects the ECB to raise interest rates by 25 basis points in December, following an anticipated hike in September. This revised forecast reflects an increasing expectation among brokerages for continued ECB tightening, especially given that growth persists and energy risks endure.

Deutsche Bank sees 2.75% as a more plausible terminal rate unless geopolitical easing occurs, which might keep rates at 2.5%. A rate move above 3% is considered unjustified without broader inflation pressures.