ECB Rate Hikes Loom as Energy Prices Soar

Wall Street banks Goldman Sachs and Citigroup have joined Barclays in predicting that the European Central Bank (ECB) will raise interest rates again, following its hawkish policy decision on Thursday. The central bank increased rates by 25 basis points as expected, but warned that inflation is likely to remain above its 2% target for an extended period.

Renewed tensions between the US and Iran have pushed crude prices above $100 a barrel, exacerbating concerns about inflation in the euro zone. This has reinforced expectations that policymakers may need to keep monetary policy restrictive for longer, as Goldman Sachs, Citi, and Barclays anticipate further rate hikes.

Goldman Sachs and Citigroup expect another rate hike in December, while Citigroup also predicts an additional increase in March 2027. Traders are pricing in a 94% chance of a quarter-point rate hike in December, according to LSEG data.