The European Central Bank is expected to deliver one final interest rate hike next week before pausing its monetary tightening cycle, according to economists surveyed by Bloomberg.
A vast majority of economists in the survey expect the central bank to raise its key deposit rate by 25 basis points to 2.5 percent during its meeting on Thursday. The survey respondents anticipate that the deposit rate will remain at 2.5 percent throughout the entirety of 2027.
The forecast by economists marks a distinctly milder trajectory than the path currently anticipated by financial markets. Traders are pricing in roughly three additional interest rate increases by the middle of next year.
Energy market disruption and inflation risks
This divergence underscores the complex equation facing European Central Bank policymakers as renewed conflict in the Middle East creates fresh turbulence in global energy markets.
Crude oil prices are climbing back toward 100 dollars per barrel, while natural gas prices have surged to levels not seen since 2023. The sudden rise in energy costs poses fresh challenges for monetary authorities seeking to stabilize consumer prices.
Although elevated inflation has so far shown no signs of becoming entrenched across the European economy, central bank officials caution that broader economic risks remain significant.
Monetary policy framework and economic backdrop
The European Central Bank, based in Frankfurt, Germany, manages monetary policy for the 20 European Union member countries that use the euro currency. Its primary mandate is to maintain price stability, targeting an annual inflation rate of 2 percent over the medium term.
The deposit facility rate is the key interest rate through which the central bank guides monetary conditions. It determines the interest commercial banks receive when depositing funds overnight with the central bank, directly influencing consumer borrowing costs, mortgage rates, and business investment across the eurozone.
Market divergence ahead of central bank meeting
Survey figures published by Bloomberg gather projections from financial institution economists ahead of major policy decisions. The European Central Bank Governing Council will meet on Thursday to weigh energy price pressures against broader inflation trends before setting official benchmark interest rates.
