Wall Street bank Morgan Stanley on Friday raised its forecast for the European Central Bank's (ECB) so-called terminal rate - the level to which it believes the ECB's key interest rate will rise - to 4% as inflationary pressures weigh on the euro zone.
"Following material revisions to our inflation forecast, we now expect the ECB's terminal rate at 4%," the bank wrote in a research note.
The move by Morgan Stanley, which had previously seen the ECB terminal rate at 3.25%, follows similar revisions by other leading investment banks, driven by inflationary pressures within the euro zone.JP Morgan this week raised its forecast on the ECB's 'terminal' rate to 3.75% from 3.50% previously. Last month Deutsche Bank lifted its forecast to 3.75% from 3.25%.
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