Barclays expects the European Central Bank to raise interest rates by a further quarter point in December, after warning that persistent inflation and rising energy costs will keep pressure on policymakers.
The forecast follows the ECB’s decision on Thursday, 10 September, to increase its three key interest rates by 25 basis points. The deposit facility rate will rise to 2.5 per cent, while the main refinancing rate will reach 2.65 per cent.
Barclays sees little prospect of an additional move in October, with policymakers likely to wait until December for updated economic projections before deciding whether to tighten policy again.
The ECB’s latest forecasts indicate that inflation will remain above its 2 per cent target for longer than previously expected. Headline inflation is projected to average 3 per cent in 2026, 2.5 per cent in 2027 and 2.1 per cent in 2028.
Inflation excluding energy and food is also expected to remain elevated, averaging 2.5 per cent this year and 2.6 per cent in 2027 before easing to 2.3 per cent in 2028.
The central bank said the conflict in the Middle East was continuing to generate inflationary pressure, particularly through higher energy prices. The rise in oil prices has increased concerns about imported inflation across the fuel-dependent eurozone.
ECB president Christine Lagarde said policymakers would continue to assess incoming data on a meeting-by-meeting basis and were not committing to a particular path for interest rates.
Financial markets were pricing in a strong likelihood of another 25-basis-point increase in December, while Goldman Sachs has also forecast a move that would take borrowing costs into “mildly restrictive territory”.
