Commerzbank forecasts December rate increases by the Federal Reserve and European Central Bank and puts the euro at $1.18 by the end of the fourth quarter of 2027, citing risks to the dollar.
The forecast, completed Sept. 18, lists EUR/USD at 1.15 at the end of the fourth quarter of 2026 and 1.18 at the end of the fourth quarter of 2027. The bank’s earlier coverage of its $1.18 euro target also discussed the projection.
For the end of the fourth quarter of 2026, Commerzbank projects the upper bound of the federal funds target range at 4.25%, up from 4.00% on Sept. 17. It puts the European Central Bank’s deposit rate at 2.75%, compared with 2.50% on that date. The 25-basis-point increases match the bank’s forecast for December. Its report expects the ECB to keep rates unchanged in 2027 after that increase.
The forecast lists Chief Economist Dr. Jörg Krämer and Senior Economist Bernd Weidensteiner as its authors. Commerzbank’s currency analysis points to U.S. political risks, including pressure on the Federal Reserve and foreign-policy decisions, as factors that could weaken demand for the dollar and encourage countries to consider alternatives. That is the bank’s rationale for its euro outlook.
On Oct. 23, the ECB set its reference exchange rate at $1.1193 per euro. The euro-area annual inflation rate reached 3.8% in September, up from 3.2% in August, Eurostat reported. The U.S. Bureau of Labor Statistics said consumer prices rose 3.7% in the 12 months through September.
Minutes of the Federal Reserve’s September meeting said most participants viewed another rate increase by year-end as likely to be appropriate. That assessment does not settle the Fed’s next decision: its meeting is scheduled for Tuesday-Wednesday, Oct. 27-28. The ECB meets Wednesday-Thursday, Oct. 28-29.
The Fed’s December meeting is scheduled for Dec. 8-9, followed by the ECB’s on Dec. 16-17. Eurostat’s October inflation flash estimate is scheduled for Nov. 4, and the U.S. October consumer price report for Nov. 10.
