Deutsche Bank now forecasts an aggressive increase in ECB interest rates by 0.5%

Deutsche Bank has moved away from the general assessment and now expects the European Central Bank to raise its interest rates by half a point (0.5%), estimating that the Bank “hawks” will convince the skeptics. their colleagues on the need to take radical action against inflation.

In particular, according to Bloomberg, the change in the assessment of a large European bank emphasizes that the momentum in favor of an emergency operation has begun to suggest that such a move is likely to eventually prevail.

Deutsche’s new forecast was made in the context of a report published yesterday and as the agency points out, this is the most aggressive assessment by anyone that was expressed in a recent Bloomberg poll on the subject.

After all, in the latest developments of the debate, the central banker of Austria and member of the Board of Directors of the Bank Robert Holtzman today voted in favor of an increase in interest rates by 50 bp. underlining that a lack of “decisive action” risks raising consumer price expectations, later calling for tougher measures that would trigger a recession.

For their part, the German bank economists typically state that “the burden of proof has shifted and the summer data now need to refute the need for a 50 bp increase at the beginning of the current increase cycle”.

While in their previous report the basic scenario of Deutsche Bank foresaw two interest rate increases of 25 bp. in July and September, the new forecast now is that one of these meetings thw EKT will result in a doubling in size, with the most likely one being in September.

If the estimate is confirmed, this would raise the deposit rate to 0.25%.

The argument for raising the ECB interest rates by 50 basis points has been further strengthened after the new record of inflation in the eurozone, which as it became known yesterday ran at a rate of 8.1% in May, four times the target set by the Bank at 2 %.

A move of 0.5% would correspond to the aggression shown by the US Federal Reserve, while so far the heads of the central banks of Austria, Latvia, the Netherlands and Slovakia have publicly mentioned the possibility of such an increase.

As the Austrian R. Holtzmann said today, “an increase of 50 basis points would send the necessary and clear message that the ECB is moving seriously in the fight against inflation.”

In contrast, Italian central banker Ignacio Visco appeared cautious yesterday, arguing that interest rate hikes should be “normal”, stressing the “uncertainty of the economic outlook”.

ECB President Christine Lagarde’s comments on the monetary policy roadmap have signaled the completion of bond markets and subsequent 0.25% interest rate hikes in July and September, according to Philip Bank chief economist Lane described it as a “reference point”.

For his part, Bank of France Governor Villarreal de Gallo said last week that the half-point increase “has not found consensus at this stage”.

This view is shared by the head of the Central Bank of Malta, Edward Sikluna, who told Market News on Wednesday that “he does not think there would be general support for a 50 basis point increase”, but added that “it will be interesting to see the discussion on this based on the new estimates “.