Commerzbank strategists forecast a September ECB rate hike, citing persistent inflation near 3% through year-end.
European Central Bank officials are signaling at least one more interest rate increase, likely in September, despite easing oil and gas prices. Commerzbank strategists expect inflation to remain around 3% through year-end as companies pass on higher costs, justifying further tightening.
The bank’s quantitative model suggests inflation risks will prompt a second rate hike, followed by gradual cuts to the deposit rate back to 2.0%. However, 10-year Bund yields may only decline once Persian Gulf tensions ease and rate cuts from the ECB and Fed become probable, potentially starting mid-2027.
High funding needs due to budget deficits in many Euro area countries could limit the fall in yields, even as easing cycles approach.