Nordea Forecasts Three More ECB Rate Hikes by Mid-2027

The European Central Bank (ECB) remains focused on upside inflation risks and is likely to continue tightening policy, according to Nordea's Jan von Gerich. The ECB's July meeting minutes indicate that they are mainly concerned about inflation risks for now.

Data dependence is still a key factor in determining the path of rates, but Von Gerich forecasts three more rate increases, in September, December, and March 2027, which would take the deposit rate to 3%. Energy prices and broader price pressures will be crucial in shaping the ECB's monetary policy decisions.

Von Gerich argues that the absence of second-round effects gives the ECB room to monitor developments, which is consistent with a quarterly pace of 25bp rate hikes. However, he notes that the situation could become more acute, leading to faster rate increases.