Stronger-than-expected economic data and recent comments by Isabel Schnabel have pushed up investors’ interest rate expectations for the coming years. Christine Lagarde will acknowledge the improvement in the data next week but won’t change her tone on the monetary policy outlook. The Bank is certain to leave its deposit rate unchanged at 2% and we expect it to refrain from giving any indication about the likely direction of the next move in interest rates. We think that the Bank is more likely to cut interest rates than hike them in 2026.
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