UBS raises expectations for ECB’s terminal rate; SocGen sees it peaking at 4%
2023.05.05 06:49
© Reuters. FILE PHOTO: A logo of Swiss bank UBS is seen in Zurich, Switzerland March 29, 2023. REUTERS/Denis Balibouse
(Reuters) -Economists at UBS expect the benchmark interest rate in the eurozone to peak at 3.75%, while Societe Generale (OTC:) 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 (NYSE:) and Bank of America (NYSE:) 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.
