European Central Bank: One more hike then extended plateau – Commerzbank

Commerzbank economists expect the European Central Bank (ECB) to leave its deposit rate at 2.50% in October, then raise it to 2.75% in December in response to persistent Eurozone inflation. With rates already seen as slightly restrictive and inflation projected to fall toward target by late 2027, they forecast the ECB depo rate staying at 2.75% throughout 2027.

December move before long pause

"We expect oil shipments from the region—which have already increased significantly in recent months via so-called “dark transits”—to normalize despite the latest setbacks. In the medium term, oil prices, and thus energy prices, are therefore likely to fall again."

"Given the persistently high inflation in the eurozone, we expect the ECB to raise interest rates once again in December and to keep them unchanged in 2027."

"According to some ECB Governing Council members, this is already the case at the current key interest rate of 2.5%. Based on the comments regarding the neutral interest rate that we have gathered over the past few months, a deposit rate of 2.75% would likely be considered slightly restrictive by the majority of Governing Council members as well."

"Factors pointing against further interest rate hikes in the new year include the decline in oil prices we anticipate, the dampening effect of higher bond yields, and the assessment by many central bankers that key interest rates will already be having a restrictive effect by then."

"Even though there is a need for action, neither the Fed nor the ECB will change interest rates next week. This is supported, among other things, by statements from officials at both central banks."