|

European Central Bank: Hikes rates with hawkish tone – Deutsche Bank

Deutsche Bank’s European economists highlight that the ECB delivered its first rate hike since 2023, lifting the deposit rate to 2.25% and pairing it with hawkish messaging from President Lagarde. The bank maintains a forecast for another hike to 2.50% in September and sees a higher probability of rates reaching 2.75% than stopping at 2.25%.

ECB path seen extending beyond September

"Aside from the Middle East news, the big story yesterday was the first ECB rate hike since 2023, with a 25bp move that lifted their deposit rate to 2.25%."

"Moreover, there were some hawkish undertones, as Lagarde described the hike as "completely warranted and justified”, even in the ECB’s milder scenario, and noted how the inflation shock was becoming broader in nature."

"Indeed, the ECB lifted their inflation projections, and now expect headline inflation to average 3.0% in 2026 (prev. +2.6%) with core inflation projected to stay above 2% all the way to 2028 (+2.2%)."

"Our own European economists are sticking to their view of one more rate hike to 2.50% in September with their economic forecasts being softer than the ECB's."

"Interestingly they say that another hike to 2.75% is more likely than stopping here at 2.25%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

GBP/USD drops to multi-week lows below 1.3300

GBP/USD sets aside Friday’s uptick and breaches below the 1.3300 yardstcik on Monday to hit new multi-week troughs. Falling crude oil prices following a pause in the Middle East conflict in combination with the recent soft reading in UK inflation appear to play against any BoE tightening ahead of the bank’s event later in the week.

EUR/USD meets support near 1.1370

EUR/USD fades the initial bull run past 1.1400 the figure, deflating toward the 1.1370 zone on Monday. That said, the pair reverses two daily drops in a row on the back of the irresolute price action in the US Dollar, at the time when investors continue to closely follow developments from the Middle East conflict. Next on tap is the release of the US Consumer Confidence gauge by the Conference Board.

Gold struggles to extend gains beyond $4,100
Spot Gold gapped higher at the beginning of the new week, as a pause in Middle East hostilities underpinned the mood and weighed on the US Dollar (USD). The XAU/USD pair traded as high as $4,116.20 during Asian trading hours, following a pause in strikes between Iran and the United States (US).
Bitcoin vs Gold: BTC and Gold struggle to gain momentum despite US-Iran truce
Market participants are changing gears on Monday from the war between the United States (US) and Iran in the Middle East to the anticipated Federal Reserve (Fed) interest rate decision. Meanwhile, Bitcoin (BTC) and Gold (XAU) are losing momentum, with BTC slipping below the pivotal $65,000 level while XAU remains sideways in the $4,000-$4,100 range.
Bitcoin options traders are dropping their hedges going into the Fed meeting
Bitcoin's options market has turned notably less defensive over the past month, unwinding the downside protection traders built up in June just as the Federal Reserve prepares to meet.
US Dollar mid-year outlook: Exceptional currency, exceptional risks?
The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.