Deutsche Bank economists note the European Central Bank (ECB) kept rates unchanged in March but now expects two 25 bp hikes in June and September, already fully priced by markets. The deposit rate sits at 2.0%, seen as neutral. Eurozone inflation is projected at 2.8% in 2026, with growth for 2026 cut to 0.5% as energy prices and weak data weigh.

ECB seen hiking twice into 2026 slowdown

"As expected, key interest rates remained unchanged in March."

"Given the energy price shock and materializing economic risks, the ECB is increasingly finding itself in a difficult position, but it is likely to have learned its lessons from the inflation shock of 2022."

"Against this backdrop, we have adjusted our key interest rate forecast and now expect two rate hikes of 25 basis points (bp) each in June and September."

"Currently, around 66 bp are priced in by the end of the year, which corresponds to an implied probability of 64% for a third rate hike."

"In our baseline scenario, we have, among other things, lowered our growth forecast for 2026 from 1.1% to 0.5%. German fiscal policy could have a stabilizing effect on the entire eurozone. We expect an inflation rate of 2.8% for 2026."

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