08:15 AM EDT, 09/05/2025 (MT Newswires) -- The European Central Bank is expected to keep policy rates unchanged at 2% again at the Governing Council meeting next Thursday, said Deutsche Bank.

Having signalled at the last meeting that the ECB is in a "good place to hold and watch," there has been nothing in the incoming data to challenge the assumption of a further pause in September, wrote the bank in a note to clients.

The focus will be on the signals for the path that lies ahead for monetary policy, stated Deutsche Bank. Several elements of the ECB's communications would determine the market reaction: what President Christine Lagarde says, what the staff forecasts show, changes to the risk assessment, how the ECB interprets the appreciation of the euro exchange rate and what, if anything, is said about France.

The bank's baseline ECB view is unchanged. At 2%, Deutsche Bank thinks the ECB has reached the terminal deposit rate in this cycle.

The risks are skewed towards further easing over the next six to nine months, but over the next year, the bank expects the risks to rotate and the ECB to hike at the end of 2026.