Markets anticipate the ECB’s 25 bps hike to 2.25% but will watch for signals on future policy amid 70 bps of expected year-end tightening.
The European Central Bank is poised to increase interest rates by 25 basis points, lifting the deposit rate to 2.25%. The move is seen as an insurance measure against second-round inflation effects and to maintain policy credibility amid revised economic projections.
Inflation forecasts for 2026 are expected to be upgraded, while projections for 2027 and 2028 remain unchanged. The ECB will emphasize its data-dependent approach, contrasting the current environment with 2022’s inflation shocks.
Markets have priced in 70 bps of additional tightening by year-end, implying two more hikes. However, the ECB’s tone may appear more cautious than expected, potentially pressuring the euro.