ECB Set to Hike Rates Again as Traders Eye December Move

The European Central Bank (ECB) is set to make a key decision today, with traders widely expecting a 25 basis point rate hike to bring the policy rate to 2.50%. The focus will be on forward guidance and the appetite for further tightening.

This comes after ECB sources signaled in August that there was less appetite at the ECB for further tightening, which gives us a baseline to work with.

Market pricing suggests another rate hike in December and a total of 85 basis points of tightening by the end of 2027. If the ECB sounds more hawkish, we could see some upside in the euro, but gains are unlikely to be sustained given the US CPI risk and the upcoming FOMC decision.

The central bank will also release updated macroeconomic projections, where growth is expected to be revised higher and inflation lower due to recent misses in core inflation readings.