Deutsche Bank strategists flag a near-certain ECB deposit rate increase next month amid sticky energy prices and wage pressures.
The European Central Bank is expected to raise its deposit rate to 2.50% in September, according to Deutsche Bank strategists, following yesterday’s decision to hold at 2.25%. The ECB’s guidance and President Lagarde’s remarks reinforced market expectations of further tightening, with no pushback on pricing for additional hikes this cycle.
The June baseline scenario assumed three rate hikes in total, implying two more after June. Lagarde’s comments suggested the ECB’s reaction function remains aligned with market expectations, while risks of a further hike beyond September hinge on sustained energy costs or second-round inflation effects.
Strategists view the September move as a near certainty, though subsequent action will depend on incoming data. The ECB’s communication has kept tightening prospects alive, with elevated energy prices and wage growth posing upside risks to inflation.