ECB Interest Rate Hike Predicted for December Amid Energy Price Concerns

BofA Global Research is forecasting a 25 basis point increase in interest rates by the European Central Bank (ECB) in December, citing elevated inflation risks due to tight energy markets through the winter peak demand season.

The brokerage notes that persistent geopolitical tensions and limited signs of a breakthrough in the Iran conflict are keeping gas and oil markets tight in Europe, which is expected to keep price pressures elevated.

BofA's latest ECB view is broadly in line with market expectations, with traders pricing in about a 93% chance of a December increase, according to LSEG data.