off-the-wire

UBS raises expectations for ECB's terminal rate; SocGen sees it peaking at 4%

Kitco Media
By Reuters
Published:
Updated:
Reuters

May 5 (Reuters) - Economists at UBS expect the benchmark interest rate in the eurozone to peak at 3.75%, while Societe Generale sees it at 4% after the European Central Bank (ECB) signalled more tightening ahead.

The central bank slowed the pace of rate increases on Thursday by delivering a quarter percentage point hike, raising the terminal rate to 3.25%.

However, UBS expects a pause after July as it sees inflation declining slowly over the summer.

Goldman Sachs and Bank of America also expect the rate to peak at 3.75%, although BofA sees a "significantly" higher chance of rates hitting 4%.

Societe Generale expects three more hikes as it sees the eurozone's core inflation staying elevated without showing convincing signs of weakening until September.

The ECB euro short-term rate (ESTR) September 2023 forward was around 3.6%, implying an ECB deposit rate peak of 3.7% by this summer.

Reporting by Aniruddha Ghosh in Bengaluru; Editing by Rashmi Aich
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