BofA: A sharp interest rate hike in the Eurozone is unlikely

According to Bank of America's assessment, the rise in natural gas prices has caused excessive shifts in expectations related to the European Central Bank's interest rate policy. Investors now expect nearly four rate hikes, though Bank of America does not yet see this as necessary.

Natural gas prices rose after the start of the war with Iran, though oil and gas futures prices have not yet significantly exceeded the ECB's June baseline forecast. According to Bank of America's assessment, energy resources would need to become considerably more expensive to justify sharper moves.

Inflation growth is likely to peak by the end of the year, yet investors still anticipate that the ECB will raise interest rates several times. Bank of America believes this expectation is excessively high, and this is precisely where it sees an opportunity for investors.

Bank of America predicts that the ECB will raise rates this year and begin cutting them next year. According to the bank, investors do not yet fully anticipate this shift.

Source: Investing.com