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We think peak deposit rate now likely to be 3½%

With a 50bp rate hike at next week’s ECB meeting seemingly a done deal, the main point of interest next week will be any messaging about how much further rates will rise beyond that. We now think that the resilience of the economy and persistence of core inflation mean the Bank will raise the deposit rate by a further 50bp in March and 25bps at the next two meetings, bringing it to a peak of 3.5%. We also expect the ECB to accelerate QT from June.

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