March 1 Reuters Goldman Sachs raised its estimate for peak interest rate hike by the European Central Bank for the second time in as many weeks, saying it now expects rates to go up by 50 basis points bps in the ECB39;s May meeting.

That would take the central bank39;s terminal rate to 3.75 by June, the brokerage said.

The bank earlier expected the ECB to hike rates by 25 bps in May for a peak rate of 3.5 by June.

Money markets expect the ECB rate to peak at around 3.85 in December this year.

The ECB has raised rates by 3 percentage points since July and promised another half a percentage increase in March, in the hope that more expensive funding will curtail demand enough to get price growth down from levels still above 8.

The brokerage39;s more hawkish expectation was prompted by recent data, including an upward surprise in Spanish and French inflation numbers, as well as recent commentary from ECB chief Philip Lane, who said that the central bank will not end rate hikes any sooner.

While a stepdown to 25 bps is still possible in May, we no longer view it as the baseline… and maintain our view that the Governing Council will maintain the peak rate until the fourth quarter of 2024, Goldman Sachs economists said in a note dated February 28.

Reporting by Siddarth S in Bengaluru; Editing by Nivedita Bhattacharjee

Source Reuters