BlockBeats News, September 7 - Deutsche Bank now expects the European Central Bank to raise interest rates by 25 basis points in December, in addition to the September hike, as persistent energy risks weigh on the inflation outlook.

The bank's research division previously expected the deposit facility rate to peak at 2.5% (currently at 2.25%), but now believes these assumptions are being challenged. Despite ongoing Iran conflict posing upside risks to inflation, the eurozone labor market conditions remain relatively weak, with little evidence so far that broader price pressures are driving wage growth.

While the bank now sees 2.75% as a more likely terminal rate level, it notes that faster easing of geopolitical tensions and weaker growth could cap rates at 2.5%, while breaking above 3% lacks justification without broader inflationary pressures. The European Central Bank is scheduled to announce its rate decision on September 10, with market expectations widely pointing to a rate hike at that time.