Morgan Stanley Predicts ECB Rate Hike in December 2026

Morgan Stanley has revised its forecast for the European Central Bank (ECB), predicting a 25-basis-point rate hike in December 2026. This change comes after the bank updated its euro area growth and inflation forecasts.

The economists led by Jens Eisenschmidt noted that euro area growth has been stronger than expected, and recent increases in oil and gas prices will lead to more persistent inflation. They anticipate inflation data between now and December 2026 will show indirect effects of higher energy prices, which typically take six-to-nine months to materialize.

The team believes the ECB is likely to deliver another rate hike in December due to concerns about core inflation following the energy shock. Morgan Stanley does not expect a hike in October, as they think the central bank will want more data before acting and that there isn't a 'smoking gun' for runaway inflation.