The European Central Bank will deliver a final deposit rate hike in this cycle in December, according to most economists in a Reuters poll. More than a third expect another increase in early 2027, as inflation runs at double the 2% target.
All 71 economists polled November 10-12 expected the ECB to raise its deposit rate to 2.75% in December. The bank already acted in June and September. That move would push the rate above the ECB's recent estimated neutral range of 1.75%-2.50%.
Most see December as the peak, but a minority expects more
A 65% majority, 46 of 71, predicted the rate will peak at 2.75% in December. However, 25 economists expect another increase, most likely in the first quarter of 2027. Markets are currently pricing in two to three hikes by the end of next year.
Fabio Balboni, chief European economist at Wellington Management, called the December move almost certain. According to Reuters: "The December hike is almost on autopilot." He put March at 50/50 for another hike, but expects December to be the last move unless energy prices flare up again.
Inflation forecasts rise as energy risks linger
Policymakers have almost locked in the December rate hike to pre-empt second-round effects from elevated energy costs. Inflation rose to a three-year high of 4% last month, and economists warn against drawing too much comfort from a more than 20% slump in oil futures in recent weeks. Low natural gas storage levels ahead of winter add to the risks.
Economists raised their inflation forecasts from a month ago. They see price growth averaging 3.1% this year and 2.8% next, up from 3.0% and 2.6% in the previous survey, and staying around twice the ECB's target until at least Q2 2027.
Core inflation, at 2.2% in October, is forecast to average 2.6% this quarter and 2.8% next. Growth is forecast at 1.1% this year and 1.3% next, up from 1.0% and 1.2% in the October survey.
Source: Investing.com (Reuters)
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