The European Central Bank is expected to raise interest rates again in December, with 64 of 73 economists polled by Reuters now predicting a 25-basis-point hike as inflation runs at nearly double the bank's 2 per cent target.
A sharp reversal in expectations
All but three of the 73 economists polled between October 5 and 8 expect the ECB to hold its deposit rate at 2.50 per cent at the October 29 meeting, matching market pricing. But a near-90 per cent majority — 64 of 73 — now see another hike in December, a clear reversal from last month's survey, when over 90 per cent expected rates to stay on hold.
The central bank raised rates for a second time this year in September. Eurozone headline inflation was 3.8 per cent in September, close to the ECB's latest worst-case scenario, and policymakers have recently argued for what ECB President Christine Lagarde called a "measured response".
How high will rates go?
A 58 per cent majority — 40 of 70 respondents — sees the deposit rate peaking at 2.75 per cent. But over a third, 24 economists, expect it to reach 3.00 per cent, up from just two last month. Markets are currently pricing nearly three hikes by the end of 2027.
"Given uncertainties, the ECB is likely to remain on the current quarterly adjustment path and that should get us to another hike in December," Morgan Stanley's chief Europe economist Jens Eisenschmidt said, adding that the main risk was "one more hike, maybe in March".
Poll medians see inflation averaging 3.7 per cent this quarter, up from 3.3 per cent in the third quarter, and averaging 3.0 per cent this year and 2.6 per cent next — both upgrades from the 2.9 and 2.3 per cent predicted last month.
Meanwhile, the eurozone growth outlook was revised up: the economy is expected to expand 1.0 per cent this year, up from 0.8 per cent in the previous survey, with growth seen at 1.2 per cent in 2027 and 1.3 per cent in 2028. There has so far been scant evidence that higher energy prices caused by the US-Israeli war with Iran are spilling into other consumer prices.
Societe Generale's senior European economist Anatoli Annenkov noted that a key argument against an October hike is that market rates have increased meaningfully and are doing some of the ECB's job for it.
Sources: Reuters (via Superhits 97.9), Reuters (via LaPost)
A sharp reversal in expectations
All but three of the 73 economists polled between October 5 and 8 expect the ECB to hold its deposit rate at 2.50 per cent at the October 29 meeting, matching market pricing. But a near-90 per cent majority — 64 of 73 — now see another hike in December, a clear reversal from last month's survey, when over 90 per cent expected rates to stay on hold.
The central bank raised rates for a second time this year in September. Eurozone headline inflation was 3.8 per cent in September, close to the ECB's latest worst-case scenario, and policymakers have recently argued for what ECB President Christine Lagarde called a "measured response".
How high will rates go?
A 58 per cent majority — 40 of 70 respondents — sees the deposit rate peaking at 2.75 per cent. But over a third, 24 economists, expect it to reach 3.00 per cent, up from just two last month. Markets are currently pricing nearly three hikes by the end of 2027.
"Given uncertainties, the ECB is likely to remain on the current quarterly adjustment path and that should get us to another hike in December," Morgan Stanley's chief Europe economist Jens Eisenschmidt said, adding that the main risk was "one more hike, maybe in March".
Poll medians see inflation averaging 3.7 per cent this quarter, up from 3.3 per cent in the third quarter, and averaging 3.0 per cent this year and 2.6 per cent next — both upgrades from the 2.9 and 2.3 per cent predicted last month.
Meanwhile, the eurozone growth outlook was revised up: the economy is expected to expand 1.0 per cent this year, up from 0.8 per cent in the previous survey, with growth seen at 1.2 per cent in 2027 and 1.3 per cent in 2028. There has so far been scant evidence that higher energy prices caused by the US-Israeli war with Iran are spilling into other consumer prices.
Societe Generale's senior European economist Anatoli Annenkov noted that a key argument against an October hike is that market rates have increased meaningfully and are doing some of the ECB's job for it.
Sources: Reuters (via Superhits 97.9), Reuters (via LaPost)
