ECB Rate Hikes Will Top Out at 2.75%, Goldman Sachs Predicts

Goldman Sachs analysts expect the European Central Bank (ECB) to hike interest rates again in December, but not as high as currently predicted. The deposit rate is expected to reach 2.75%, up from its current level of 2.5%. One reason for this forecast is the resilience of the euro area's economic growth, which exceeded expectations in the first half of the year despite energy price shocks.

The expansion was driven by reduced sensitivity to energy prices, increased fiscal spending in Germany, and knock-on effects from global AI investments. Goldman Sachs Research expects GDP growth to rise from 1% this year (Q4 over Q4) to 1.4% in 2027.

Rising energy prices do pose a risk to economic growth, but the ECB's hawkish communication suggests it may need to raise rates to lean against inflation persistence. Goldman Sachs is skeptical of current market pricing that the ECB will take rates significantly above 3%.