Deutsche Bank's institutional clients are increasingly convinced the European Central Bank still has more hiking to do before it even starts thinking about cuts, according to a fresh survey carried out by the bank's analysts. Most respondents expect another rate rise as soon as September, and the range of outcomes they see for where rates will finally peak, known as the terminal rate, has widened toward the higher end.
Where clients think rates will peak
Deutsche Bank analysts Mark Wall and Michael Kirker, who compiled the results, found that opinion among clients is split across three possible peaks for this hiking cycle rather than settled on one number. Respondents were roughly divided into three camps.
"31% see 2.50% as the terminal rate, 37% see 2.75%, and 26% see 3.00%."
That breakdown means the single largest group, 37% of respondents, expects the ECB to keep raising its key rate until it reaches 2.75% before pausing. A smaller but still substantial 31% think the central bank will stop earlier, at 2.50%, while 26%, roughly one in four, expect rates to climb all the way to 3.00%. No group makes up a clear majority, which shows that even among professional investors and analysts who follow the ECB closely, there is no settled consensus on exactly how far this cycle will run. What is notable, though, is that all three scenarios assume further hikes from here, not a pause at current levels.
Worries about overtightening have cooled since June
The survey also tracked how client sentiment about the risk of the ECB going too far has changed over time, and the shift is significant. The proportion of respondents who believe the central bank will end up hiking by more than is actually needed has fallen from 71% in June to 56% in the latest survey. A majority of clients still think the ECB risks overtightening, but that majority has shrunk by 15 percentage points in a matter of months, suggesting a growing share of respondents now see continued hikes as appropriate rather than excessive. That cooling in concern lines up with the broader finding that clients expect the ECB to keep raising rates rather than pause.
Market pricing is running even hotter than the survey
Deutsche Bank's analysts pointed out that actual market pricing is currently more aggressive than what most of their survey respondents expect. Current pricing in the market implies the ECB should raise its key rate to around 3% by the middle of next year, a level that sits at the very top of the range most survey respondents are forecasting, and above what the largest single group of respondents, those expecting a 2.75% peak, currently anticipate. The gap between where traders have positioned themselves and where Deutsche Bank's own client base expects the ECB to land underlines just how much uncertainty remains around the path of policy from here.
Even less agreement on when cuts will start
If clients are divided on how high rates will go, they are even more spread out on when the ECB will start bringing them back down. Wall and Kirker's survey found views on the timing of the next rate cutting cycle stretched across a wide window, running from the second quarter of 2027 through to 2028 or later.
Within that window, opinion is fairly evenly split across four separate quarters, from Q2 2027 to Q4 2027, with each individual quarter attracting somewhere between 20% and 26% of responses. Beyond that, 23% of those surveyed, close to a quarter of all respondents, think the ECB will not begin cutting rates at all until 2028 or later. That means more than a fifth of clients see the entire cutting cycle as being at least two years away from starting, even as most of the same group expects the ECB to still be raising rates in the near term.
What it adds up to
Taken together, the findings describe a central bank that Deutsche Bank's own clients believe is not finished tightening policy. A move as soon as September is seen as likely, the eventual peak is expected to land somewhere between 2.50% and 3.00%, and any meaningful pivot toward rate cuts looks, in the eyes of most respondents, to be years rather than months away. For households and businesses across the eurozone that depend on ECB policy for the cost of mortgages, loans and credit, that points toward borrowing costs staying higher for longer than some may have been hoping just a few months ago, even though the intensity of concern about the ECB overtightening has eased noticeably since June.
