Deutsche Bank Raises ECB Rate Forecast Amid Ongoing Energy Risks

Deutsche Bank has revised its forecast for European Central Bank interest rates, citing persistent energy-related risks and resilient economic growth. The bank now expects the ECB to raise rates by another 25 basis points in December, in addition to an anticipated hike in September.

The previous forecast had predicted the ECB's deposit facility rate would peak at 2.5%, modestly above its current level of 2.25%. However, with energy prices continuing to pose a risk to inflation, Deutsche Bank now considers 2.75% the more likely terminal rate for the ECB.

The bank notes that a prolonged conflict involving Iran could create further upside risks to inflation, although the euro zone labour market remains relatively soft. There is also limited evidence of broader price pressures translating into stronger wage growth.