ECB Seen Hiking Rates for Last Time in September

The European Central Bank (ECB) is expected to raise interest rates for the second and final time in September, according to a Reuters poll. The poll of 65 economists predicts that the ECB will increase its deposit rate by a quarter-point to 2.50% next week, up from 83% in an August poll and 72% before the July policy meeting.

Most economists believe that energy price rises are not likely to trigger broad inflation pressures, and that the ECB will be disinclined to add further pressure on a fragile economy. Carsten Brzeski, global head of macro at ING, expects a September quarter-point rise but no more after that, stating 'it's difficult to envisage the ECB being willing to risk a recession to tackle what is still a textbook supply-side shock.'

The ECB last raised rates in June, and about 91% of economists predict the deposit rate will end this year at 2.50%, while 78% see it staying there through the middle of next year.

Economists have revised their inflation forecasts upward six times this year to 2.9%, with forecasts for this quarter and next revised to 3.2% and 3.3%. Inflation is not expected to return to the ECB's 2% target until late 2027, with core price pressures expected to firm over the next few quarters.