Investment Banks Accelerate ECB Rate Hike Expectations

The headquarters of the European Central Bank (ECB) is pictured in Frankfurt January 21, 2015. REUTERS/Kai Pfaffenbach

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June 6 (Reuters) – BofA Securities now expects the European Central Bank to raise interest rates by 150 basis points this year, including moves of 50 basis points in July and September, it said. she said in a memo distributed on Monday.

The bank, which previously expected 100 basis point hikes this year, said last week’s eurozone inflation, well above expectations at 8.1%, confirmed that 100 basis points was the minimum the bank would provide.

“Our call was already more hawkish than the consensus, and is even more so now. We continue to worry that it is too fast,” the analysts said in the note.

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In a separate note, Barclays said on Monday that it now expects the ECB to increase in 25 basis point increments at each meeting from July to December.

She expects another hike after that in the first quarter of next year, which would take the ECB’s deposit rate to 0.75%.

The ECB last raised interest rates in 2011 and its deposit rate is currently at -0.50%.

Currency markets are currently pricing in increases of more than 130 basis points by year end, with a 50 basis point move in a single fully priced meeting by October.

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Reporting by Yoruk Bahceli and Dhara Ranasinghe

Our standards: The Thomson Reuters Trust Principles.

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