The European Central Bank (ECB) is expected to raise its deposit rate by 25 basis points to 2.75% in December, according to a Reuters survey of 71 economists. All economists surveyed expect the increase, reflecting a strong consensus that the ECB still needs to maintain tighter monetary policy.
Of the 71 economists surveyed, 46 expect the deposit rate to peak at 2.75%. Meanwhile, 25 economists see the possibility of an additional rate hike after December, with most expecting the move to take place in the first quarter of 2027.
Expectations for further rate increases have strengthened after Eurozone inflation forecasts were revised higher again. Economists now expect inflation to average 3.1% in 2026 and 2.8% in 2027, up from previous forecasts of 3.0% and 2.6%, respectively.
Inflation is expected to remain around twice the ECB’s 2% target through at least the second quarter of 2027. Meanwhile, core inflation is projected to reach 2.6% this quarter and rise to 2.8% in the first quarter of 2027, indicating that underlying price pressures remain relatively strong.
Despite rising inflationary pressures, the outlook for Eurozone economic growth has improved. Economists now expect the regional economy to expand by 1.1% in 2026 and 1.3% in 2027, up from previous forecasts of 1.0% and 1.2%, respectively.
The combination of persistently high inflation and improving economic growth gives the ECB room to maintain a tighter monetary policy stance. With all economists surveyed expecting a rate hike in December, attention will now turn to whether the ECB will continue tightening monetary policy into 2027.
Newsmaker Analysis: The ECB faces a dilemma between persistently high inflation and an improving economic outlook. Expectations of a December rate hike show that inflation control remains the ECB’s priority, while stronger economic growth gives the central bank more room to maintain a tighter policy stance. (arl)
Source: Newsmaker.id