ECB: Deposit rate to rise to 4.00% by September, and be held there until mid-2024 – TDS

Economists at TD Securities have materially upgraded their euro-area inflation forecasts. Jointly, they have upgraded their expectations of the ECB's terminal policy rate. 

Cuts to begin in June 2024

“We have materially upgraded our inflation forecast for the euro-area through 2023. We now expect headline inflation to be 3.6% YoY in 23Q4 (ECB: 2.8%) and core inflation to be 4.3% that quarter (we had previously been below 4%).”

“We've flagged upside risks to our call of a 3.50% terminal, and the totality of ECB communication at and since its May decision, coupled with continued strong momentum in economic data, to our eyes suggest that the ECB will continue hiking into the summer, reaching a terminal rate of 4.00% by September.” 

“We look for cuts to begin in June 2024 at regular 25 bps increments until 2025 when a neutral 2.00% rate is reached.”