London (Reuters) – Deutsche Bank says that the European Central Bank’s decision to create a new tool to ease stress in euro area bond markets makes it possible for it to raise interest rates three times by 50 basis points this year (ETR: DBKGn).
On Wednesday, the ECB said it would give more help and work on a possible new plan to stop a market sell-off that has raised fears of a new debt crisis in the southern part of the euro currency area.
“This makes the second half of the year less uncertain,” Deutsche Bank analysts wrote in a note that came out late Wednesday. “Using the tools to stop fragmentation clears the way for policy rates to go up and for the tightening cycle to go faster.”
“We are adding a third increase of 50 bps to our call.” We now see increases of 25bp in July and 50bp in September, October, and December. This means that the deposit rate will go up by 175bps over the next six months, to 1.25 percent “s year.”
