(Adds forecast from BofA Global Research)
By Sudip Kar-Gupta
March 3 (Reuters) - Morgan Stanley and three other
investment banks have revised their forecasts for the European
Central Bank's terminal rate - the level at which its key
interest rate will peak - to 4% as inflationary pressures weigh.
Data this week showed a surprise surge in underlying
inflation across the 20-nation euro zone.
The revisions also come on the heels of remarks by ECB
governing council member and Belgian national bank governor
Pierre Wunsch on Friday that the ECB could consider raising its
key interest rate to as high as 4% if underlying inflation
remains persistently high.
BofA Global Research, BNP Paribas and Barclays joined Morgan
Stanley in the upward revisions. Morgan Stanley and BNP Paribas
had previously seen the terminal rate at 3.25%. Barclays and
BofA had expected it to peak at 3.5%.
The ECB has raised rates to 2.5% from a record low of -0.5%
in July 2022.
Barclays said in a note to clients that it expects 50 basis
point rate increases in March and May, and 25 basis point rises
in June and July.
"We could be dealing with six more weeks of extreme data
dependence, contradictory central bank speak and plenty of
volatility," BofA economists warned in a note.
JP Morgan this week raised its forecast for the terminal
rate to 3.75% from 3.50%.
(Reporting by Sudip Kar-Gupta in Paris, Alun John and Sam Indyk
in London, Susan Mathew in Bengaluru; Editing by Edwina Gibbs
and Anil D'Silva)
