UBS Expects Another ECB Rate Hike in December

UBS has revised its forecast for the European Central Bank (ECB), expecting another rate hike in December. This follows the ECB's decision to raise its deposit rate by 25 basis points to 2.5% on Wednesday, in line with market expectations.

UBS economists led by Reinhard Cluse stated that they had previously expected 2.5% to be the peak in ECB rates but have changed their view after the press conference and release of new ECB staff macroeconomic forecasts.

The broker now expects the ECB to pause at its next meeting on October 29, before hiking again to 2.75% at the December 17 meeting. It predicts that the ECB will later reverse this hike in the fourth quarter of 2027 and hold rates at 2.5% after that.

ECB President Christine Lagarde described Wednesday's decision as unanimous and a 'no-brainer,' arguing it was justified under all of the central bank's updated scenarios.