German business sentiment unexpectedly surged to a 15-year high in March, showing a broad recovery in Europe's largest economy and increasing expectations that the European Central Bank will raise interest rates in May. The Ifo institute said on Tuesday its business climate index, based on a monthly survey of around 7,000 firms, rose to 105.4 from an upwardly revised 103.4 in February. The rise surpassed the top forecast in a Reuters poll of economists. Investors raised their bets on the possibility that the ECB will increase rates in May after the Ifo report and data showing an acceleration in euro zone money supply growth in February. Another report showed stronger Italian business morale in March. "A rate hike in May is very, very likely," said Bank of America economist Holger Schmieding. "In the summer, the interest rate should be at three percent -- at the latest in August, but maybe already in July." The ECB raised interest rates in December and March, taking the benchmark rate to 2.5 percent. ECB Governing Council member Guy Quaden said on Monday euro zone rates may still be too low. After Tuesday's data, markets showed investors were putting the probability of a quarter point ECB interest rate rise in May at 60 percent or higher, up from about 50 percent on Monday. The euro jumped to its highs for the day against the dollar while Bunds fell to session lows after the Ifo was published. The survey showed strength across the German economy and was well above a consensus forecast for a 102.8 reading. The rise was the fourth in succession, and took the index to its top level since March 1991. Ifo economist Gernot Nerb said the survey showed a real upswing was underway in Germany. "It looks like this will be a full-blown upturn," he told CNBC TV.