ECB Rate Hikes on the Horizon Amid Inflation Concerns

Global financial institutions are predicting further interest rate hikes from the European Central Bank (ECB) in response to its recent hawkish policy decision. Goldman Sachs, Citigroup, and Barclays expect an additional rate increase in December, with Citigroup anticipating a second hike in March 2027.

The ECB's decision to raise rates by 25 basis points has reinforced concerns that inflation may remain elevated for longer. Renewed hostilities between the United States and Iran have pushed crude prices above $100 a barrel, exacerbating the inflation outlook for the euro zone.

UBS Global Research sees the move being reversed later, with interest rates returning to 2.5% by the fourth quarter of 2027. According to LSEG data, traders are pricing in a 94% chance of a quarter-point rate hike in December.

The ECB has emphasized that future policy decisions will be data-dependent. The next meeting is scheduled for October 29.