ECB Might Guide Market Toward 3.75% Peak Deposit Rate

European Central Bank hawks have softened their tone, but there is still a consensus that underlying inflation dynamics remain too high, says Gabriele Foa, portfolio manager at Algebris Investments. The ECB is likely to raise interest rates by 25 basis points on Thursday, bringing the deposit rate to 3.5%, aligning with market expectations and previous committee guidance, Foa writes in a note. “Focus will lie on the new inflation and growth expectations, which may be lowered following recent negative data surprises,” he says. Algebris anticipates the ECB will provide guidance for further rate increases and a projected…