ECB Likely to Hike Rates by Another 25bps in December: Barclays

Barclays expects the European Central Bank (ECB) to raise interest rates again in December, by another 25 basis points. This decision comes after the ECB's Governing Council meeting on the same day, where it increased key policy rates by 25bp.

The bank argues that upside surprises in inflation and rising energy prices justify further monetary tightening. The ECB's latest economic projections indicate that inflation will remain above the 2% target for a prolonged period.

Financial markets have already priced in additional tightening, with a probability of 93.9% assigned to a 25bp hike in December, according to LSEG data. Goldman Sachs also expects an additional 25bp hike in December, which would push policy rates into 'moderately restrictive territory'. The firm noted that the ECB's baseline scenario projects inflation returning to the 2% target only in late 2027.