Deutsche Bank macro strategists warn: Markets may again be underestimating the terminal interest rate after synchronized rate hikes by the world's three major central banks.
Deutsche Bank macro strategist Henry Allen warned on Monday that despite the Federal Reserve, the European Central Bank, and the Bank of Japan all raising interest rates in the past two weeks, the market may still be underpricing the terminal rate for this tightening cycle. Deutsche Bank believes that inflationary pressures could be more persistent than expected, and financial conditions have not deteriorated in sync with policy tightening, which may force central banks to maintain higher interest rates for longer. Energy prices (Brent crude hovering around $96 per barrel) and loose asset market performance are key bases for its assessment.
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