Deutsche Bank has lowered their forecast for the ECB terminal rate from 2.25% to 1.5%, due to the prospect that U.S. Tariffs will be implemented under a Donald Trump Administration, weaker macroeconomic performance and the risk of inflation below target.

Deutsche stated that many of these factors were uncertain, such as the exact impact of U.S. Tariffs, the timing of their implementation and the response of Europe. They see the ECB's terminal rate dropping between 1.0% to 1.75%.

The ECB's main benchmark rate is currently 3.25%.

Deutsche said that it expects 25 basis points cuts at the next five ECB meeting, and added that, while its outlook does not include a cut of 50 bps, larger cuts are a close call.

(source: Reuters)