ECB Rate Hike Expectations Shift on Rising Inflation Risks
Major global banks including J.P. Morgan, Morgan Stanley, and Barclays now expect the European Central Bank (ECB) to begin raising interest rates in 2026. This marks a significant shift from earlier forecasts that anticipated a prolonged pause in monetary policy.
The revised outlook comes as policymakers warn that escalating tensions in the Middle East, particularly the Iran conflict, could drive inflation higher across the eurozone.
Analysts Forecast Multiple Rate Hikes in 2026
Barclays and J.P. Morgan are projecting that the ECB could deliver its first rate hike as early as the April policy meeting. They also anticipate additional increases in June and July as inflation pressures persist.
Meanwhile, Morgan Stanley expects a more gradual approach, forecasting two 25-basis-point rate hikes in June and September.
ECB Signals Policy Shift Despite Holding Rates
The change in expectations follows the ECB’s recent decision to keep its benchmark interest rate unchanged at 2%. Despite holding rates steady, policymakers indicated that discussions around potential hikes are likely in the coming months.
Rising energy prices linked to the Iran conflict are seen as a key risk factor that could push inflation higher, prompting the ECB to reconsider its current policy stance.
