Updated version 1 - Standard Chartered Bank, along with major banks, bets on the European Central Bank raising interest rates in December.

Full text updated with additional background information

Reuters, October 2 - Standard Chartered Bank expects the European Central Bank to raise its deposit rate by 25 basis points to 2.75% in December, reversing its previous forecast of a pause in rate hikes. This comes after inflation data outperformed expectations (link) and economic activity proved resilient, further strengthening the case for continued monetary tightening.

The brokerage adjusted its forecast because September euro zone inflation rose faster than expected, mainly driven by higher energy prices; at the same time, recent business activity data indicate the economy is more resilient than previously thought.

Major Wall Street banks generally (link) expect the European Central Bank to raise rates again in December.

The European Central Bank (link), like several other major central banks, raised interest rates last month as policymakers aimed to contain the inflation risk arising from rising energy costs and strengthening economic resilience.

“We believe the European Central Bank will choose to nudge rates higher into restrictive territory,” economists from the brokerage wrote in a report, adding that policymakers are likely to guard against the risk of higher energy prices feeding through into wages and triggering broader price pressures.

The next European Central Bank meeting is scheduled for October 29, but Standard Chartered Bank said a hike is more likely in December, as policymakers will then have access to the latest economic projections and a new round of inflation data, though signs of second-round price pressures remain limited for now.

Data from the London Stock Exchange Group (LSEG) shows that money markets currently price about a 65% probability of a 25 basis point European Central Bank rate hike in December.

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