# Morgan Stanley, others now forecast 4% peak for key ECB rate
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-03
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro Zone Inflation Surge Prompts Banks to Raise ECB Rate
Meta Description: Morgan Stanley, BNP Paribas, and Barclays revise their forecasts for ECB's key interest rate peak amidst inflationary pressures. Expect rate hikes to 4%.
URL: https://financedigest.com/morgan-stanley-others-now-forecast-4-peak-for-key-ecb-ratehtml

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By Sudip Kar-Gupta

(Reuters) -Morgan Stanley and two other investment banks have revised their forecasts for the European Central Bank’s terminal rate – the level at which its key interest rate will peak – to 4% as inflationary pressures weigh.

Data this week showed a surprise surge in underlying inflation across the 20-nation euro zone.

The revisions also come on the heels of remarks by ECB governing council member and Belgian national bank governor Pierre Wunsch on Friday that the ECB could consider raising its key interest [rate to as high as 4% if underlying inflation](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February") remains persistently high.

BNP Paribas and Barclays joined Morgan Stanley in the [upward revisions](https://www.financedigest.com/french-inflation-revised-upwards-in-february-to-7-3-final-figures.html "French inflation revised upwards in February to 7.3% – final figures"). Morgan Stanley and BNP Paribas had previously seen the [terminal rate](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") at 3.25%. Barclays on Feb.17 had [raised its forecast](https://www.financedigest.com/cisco-forecast-raise-allays-tech-spending-fears-lifts-shares.html "Cisco forecast raise allays tech spending fears, lifts shares") to 3.5%.

The [ECB has raised rates](https://www.financedigest.com/instant-view-ecb-sticks-with-big-rate-hike-even-as-bank-fears-roil-markets.html "Instant View: ECB sticks with big rate hike even as bank fears roil markets") to 2.5% from a record low of -0.5% in July 2022.

Barclays said in a note to clients that it [expects 50 basis point rate](https://www.financedigest.com/ecbs-makhlouf-expects-50-bps-rate-hike-in-december.html "ECB’s Makhlouf expects 50 bps rate hike in December") increases in March and May, and 25 basis point rises in June and July.

JP Morgan this week [raised its forecast for the terminal rate](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") to 3.75% from 3.50%.

(Reporting by Sudip Kar-Gupta in Paris, Alun John and Sam Indyk in London; Editing by Edwina Gibbs)


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