Deutsche Bank: Expects ECB to Hike in September, Possibly Again in December

On September 7, Deutsche Bank now expects the European Central Bank to hike rates by 25 basis points in December, in addition to a September increase, as persistent energy risks pressure the inflation outlook. The bank's research department previously expected the deposit facility rate to peak at 2.5% (currently 2.25%), but now believes these assumptions are being challenged. Despite ongoing Iran conflicts posing upside risks to inflation, labor market conditions in the euro area remain relatively weak, with little evidence so far that broader price pressures are driving wage growth.

While the bank now sees 2.75% as a more likely terminal rate level, it notes that faster easing of geopolitical tensions and weaker growth could keep the rate ceiling at 2.5%, while a move above 3% lacks justification without broader inflationary pressures. The ECB is scheduled to announce its rate decision on September 10, with market expectations widely pointing to a hike at that time.

[Rhythm]