(Reuters) – Many investment banks raised their forecast for the European Central Bank’s (ECB) terminal deposit rate from 3.75% to 4%, after the institution’s more offensive than expected announcements at the outcome of its monetary policy meeting.
JPMorgan, Goldman Sachs, BNP Paribas, Unicredit and RBC Capital Markets are now pricing in a quarter-point rate hike in both July and September.
The ECB raised its three key rates on Thursday – with the deposit rate set at 3.5% – and signaled that another hike is likely to follow next month, without coming forward to the September meeting.
“The signal for July was more explicit than it should have been and therefore reveals significant concern about the outlook for inflation. The fact that the signal did not extend to September and beyond is less surprising and doesn’t take away from the ‘hawkish’ message,” said JPMorgan economist Greg Fuzesi.
The institution also revised upwards its forecasts for headline inflation and “core” inflation between 2023 and 2025, which surprised analysts. RBC considers the revision of core inflation for 2024, from 2.5% to 3.0%, “particularly striking”.
Goldman Sachs and Unicredit do not anticipate a rate cut before the end of next year.
“A higher terminal rate is also consistent with what we have learned from other countries, many of which are ahead in the cycle of inflation and monetary tightening. stronger than expected,” Goldman Sachs wrote in a note.
(Aniruddha Ghosh, Laetitia Volga, edited by Blandine Hénault)
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