Central Banks Projected to Raise Rates Through Early 2027
Deutsche Bank and Reuters economists project the Federal Reserve and European Central Bank will implement interest rate hikes to combat persistent inflation.
Global financial forecasts indicate a period of continued monetary tightening as central banks struggle with persistent inflation. Deutsche Bank projects that the Federal Reserve System will implement three interest rate increases through March 2027, which would raise the federal funds target range to 4.50% to 4.75%. This sequence includes a quarter-point increase in December 2026, followed by hikes in January and March 2027. The bank recently added the January increase to its forecast after October consumer price data exceeded expectations and raised its neutral-rate estimate to 3.75% to 4.00%.
Simultaneously, a Reuters poll of 71 economists indicates the European Central Bank is expected to raise its deposit rate to 2.75% in December. While a 65% majority believe this will be the final hike of the current cycle, over a third of economists anticipate further increases in the first quarter of 2027. This outlook follows inflation reaching a three-year high of 4% last month, compounded by risks from low natural gas storage levels heading into winter.
Economists predict Eurozone price growth will remain around double the European Central Bank's 2% target until at least the second quarter of 2027. Market pricing suggests two to three more hikes by the end of next year to pre-empt wage increases and second-round effects from energy costs.
