📝 Expect ECB Deposit Rate At 3% By 1Q 23: Commerzbank

Raising our ECB deposit rate forecast as inflation expectations are getting out of control. Now see the deposit rate reaching 3% by the first quarter of next year. Expect the ECB to lift rates by 75bps over the next two meetings, followed by 50bps in February and a 25bps hike in March. Long-term inflation expectations have started to de-anchor, this is an alarm signal for any central bank. We have also revised higher our inflation forecasts for the euro area, 2023 consumer prices are now seen accelerating by 7%, up from the previous projection of 5.2%.

The pronounced inflation problem forces the central bank to act quickly. On the other hand, it obviously wants to use the time for interest=rate hikes as long as the feared recession is not yet visible in the GDP data. - Commerzbank