ECB May Deliver Final Interest Rate Hike in December 2026

European Central Bank (ECB) policymakers may deliver one final 'insurance' interest rate hike in December 2026, according to ING. The bank points to slightly hawkish signals in the ECB's forecasts and the ongoing risk of high oil prices driving inflation.

The ECB's projections suggest that headline inflation will only drop below 2% in the fourth quarter of 2027, while underlying inflation is expected to edge up. This has led ING to believe that the central bank hasn't fully relaxed about inflation, and may still see room to tighten if price pressures return.

ING also notes that ECB President Christine Lagarde has downplayed the idea of a 'neutral' interest rate, suggesting officials may be prepared to adjust policy further. The main concern is energy prices, which are currently above $100 per barrel. Policymakers may prefer to insure against another inflation spike like in 2022, when the ECB was criticized for reacting too late.

However, ING frames any December move as a final adjustment, not a new hiking campaign, because each extra increase risks unnecessary damage to growth. Market expectations for at least two more hikes in 2027 are seen as 'overdone' unless an oil spike triggers broader inflation effects.