Deutsche Bank Warns Markets Underestimate Terminal Rate; Fed, ECB, BOJ Tighten in Sync

Deutsche Bank macro strategist Henry Allen warned on Sept. 21, 2026, that investors are misjudging how high and how long central banks will need to raise rates, after the Fed, ECB and BOJ tightened in the past two weeks. The risk is not whether hikes continue, but the terminal rate level. The bank cited four factors. Brent crude trades near $100 a barrel and commodity cost pressures have yet to fully feed into inflation data, with possible second-round effects via transport, production and services. Policymakers are also far more sensitive to price risks than in 2022, when major central banks acted only after inflation passed 8%. Fed Chair Warsh has acknowledged U.S. inflation has stayed above target for more than five years. Financial conditions remain relatively loose, with the S&P 500 near record highs and credit spreads tight, potentially forcing more hikes. Deutsche Bank noted investors in early 2022 priced roughly 200 basis points of Fed tightening in the first year; more than 400 basis points followed. It added that a deeper cycle does not guarantee a stock selloff, citing 1999, when the S&P 500 rose nearly 20% even as the Fed hiked and Treasury yields climbed.