Markets Price In Further ECB Rate Hikes as Inflation Pressures Persist

Markets are already pricing in further European Central Bank (ECB) rate hikes as inflation pressures persist, according to recent data. The ECB raised its deposit rate to 2.50% at its September meeting, but this move did not signal the end of the rate-hike cycle.

ECB President Christine Lagarde kept her position open after the Governing Council meeting, repeating that decisions would be taken meeting by meeting and would depend on incoming economic data. However, markets are increasingly preparing for a more aggressive scenario, with investors pricing in a new cycle of rate increases.

The prevailing scenario points to further hikes through the end of 2027, with borrowing costs potentially reaching higher levels than previously expected before inflation pressures intensified. Markets now see a possible new increase as early as the next ECB meeting on October 29, if inflation pressures remain strong.