A recent Deutsche Bank survey, as reported by Mark Wall and Michael Kirker, reveals that clients anticipate the European Central Bank (ECB) will continue its rate hiking cycle, with a strong bias toward another increase in September and a terminal rate projected between 2.50% and 3.00% [1]. The survey indicates that 31% of respondents expect the terminal rate to be 2.50%, 37% foresee 2.75%, and 26% predict 3.00% [1]. Deutsche Bank itself has revised its expectations, now forecasting another hike in December, which would bring the terminal rate to 2.75% [1].
Market pricing currently suggests the ECB should hike to around 3% by the middle of next year, reflecting the divided views among survey participants regarding the ultimate peak of the rate hiking cycle [1]. There is also significant uncertainty about the timing of the next rate cutting cycle, with expectations spread from Q2 2027 to 2028 or later. Specifically, 20%-26% of respondents anticipate cuts beginning between Q2 and Q4 2027, while 23% expect the cutting cycle to start in 2028 or beyond [1].
Concerns about the ECB overtightening have eased since June, as the share of respondents fearing excessive hikes has declined from 71% to 56% [1]. Conversely, the proportion of those who believe the ECB will not hike enough has increased from 13% to 22% [1]. These shifts suggest a moderation in market anxiety over policy errors, though a majority still see overtightening as the primary risk [1].
No specific market reactions or analyst opinions beyond the survey results and Deutsche Bank's own forecast revision are mentioned in the article [1].
CONCLUSION
The Deutsche Bank survey highlights a market consensus for higher ECB rates and a later start to rate cuts, with most respondents expecting the terminal rate between 2.50% and 3.00%. Concerns about overtightening have moderated, but uncertainty remains about the timing of future policy easing. The market impact is medium, reflecting ongoing debate about the ECB's policy trajectory.