ECB Rate Hikes May Be Overpriced, Analysts Warn

Investors may be overestimating the European Central Bank's (ECB) plans to raise interest rates, according to Capital Economics analysts. They argue that a temporary inflation spike caused by higher energy prices is unlikely to lead to persistent wage pressures.

The research firm expects the ECB to increase its deposit rate again in December, taking it to 2.75% from 2.5%, but sees little need for further tightening after that.

Capital Economics forecasts rate cuts to return to the agenda in the second half of 2027, with the deposit rate eventually falling to 2% in 2028.