Deutsche Bank Expects ECB Rate Hikes Through December

Deutsche Bank has revised its interest rate forecast for the European Central Bank (ECB), now expecting a hike of 25 basis points in December on top of a September increase. This change comes as energy risks continue to put pressure on inflation outlook, challenging previous assumptions that the price shock would be short-lived and economic growth weak.

The bank's research arm had previously predicted interest rates would peak at 2.5%, just above the ECB's current deposit facility rate of 2.25%. However, with a prolonged Iran conflict posing upside risks to inflation, and euro zone labour market conditions remaining relatively soft, the terminal rate is now seen as more likely to be 2.75%.

The revised forecast comes in line with growing expectations from brokerages that the ECB will continue to tighten monetary policy this year, keeping borrowing costs higher for longer as growth holds up and energy risks persist.