Nordea forecasts four ECB rate increases to 3%, citing strong core inflation and service sector price pressures.
The European Central Bank is expected to raise interest rates next week, driven by persistent inflation and robust core momentum. Nordea’s baseline projection includes four hikes, pushing rates to 3%, though a weaker growth outlook could limit the cycle’s duration.
Recent inflation data showed strong monthly core inflation, reinforcing the ECB’s urgency compared to the Fed’s more cautious stance. Surveys indicate price pressures in the service sector, while energy price spillovers remain a concern. Markets are pricing a similar outcome for the upcoming meeting.
Uncertainty lingers over the hiking cycle’s length, as softer growth data could shorten the path to peak rates. Hard data, however, continues to hold up better than survey expectations.