ECB Clients Anticipate More Rate Hikes, But Views Diverge on Terminal Rate

The European Central Bank (ECB) is expected to continue hiking interest rates, according to a survey by Deutsche Bank. Mark Wall and Michael Kirker reported that respondents anticipate another rate hike in September, with a strong bias towards a terminal rate between 2.50% and 3.00%. The survey found that 37% of respondents see the ECB reaching a terminal rate of 2.75%, while 26% expect it to reach 3.00%

The views on when the next rate cutting cycle will begin are spread out, with 20-26% expecting it to start in Q2 2027 to Q4 2027, and 23% anticipating it to happen in 2028 or later.

Concerns about overtightening have eased since June, and the share of respondents who think the ECB hikes policy rates too much has decreased from 71% to 56%. However, the share who think the ECB won't hike enough has increased from 13% to 22%