UBS Expects Additional ECB Rate Hike to 2.75%

UBS has revised its forecast for the European Central Bank (ECB) following the bank's recent decision to raise interest rates. The deposit rate was increased by 25 basis points to 2.5% on Wednesday, in line with expectations.

According to UBS economists, led by Reinhard Cluse, they had previously expected 2.5% to be the peak in ECB rates. However, after the press conference and the release of new ECB staff macroeconomic forecasts, their view changed.

The broker now expects an additional 25 basis-point rate hike in December, bringing the deposit rate to 2.75%. They believe the ECB will pause at its next meeting on October 29, before hiking again to 2.75% at the December 17 meeting.