Nordea Sees ECB Delivering Two More Rate Hikes by End-2027

Nordea analysts are predicting two additional 25 basis point interest rate hikes from the European Central Bank (ECB) in December and March 2027, despite rising energy costs driving up market pricing.

The bank attributes this repricing to the ongoing tensions in the Middle East and the subsequent rise in gas prices. However, they believe that the ECB will stick to a gradual quarterly tightening rhythm, as seen in recent economic data and central bank messaging.

This mismatch between market expectations and the likely actions of the ECB presents an opportunity for traders to exploit overinflated interest rate expectations in derivatives markets.