July 3 Reuters Morgan Stanley on Friday raised its forecast for the European Central Bank39;s ECB terminal rate to 4 after June inflation data for the euro zone showed only the smallest drop in underlying inflation.

The bank previously expected ECB39;s main interest rate would peak at 3.75, following an expected 25 basis points hike in July.

After updating our inflation forecast with the June data, and taking stock of recent commentary from policymakers at this week39;s ECB Forum on Central Banking in Sintra, we change our ECB call and now see a terminal rate of 4, Morgan Stanley said.

Reporting by Roshan Abraham in Bengaluru; Editing by Savio D39;Souza

Source Reuters