J.P. Morgan and BNP Paribas shift to forecast December ECB rate hike
Major brokers now predict the European Central Bank will raise rates by 25 basis points in December, reversing earlier forecasts that the tightening cycle would end.
J.P. Morgan and BNP Paribas have revised their economic forecasts to expect another 25-basis-point interest rate increase from the European Central Bank in December. This adjustment marks a shift from previous projections where these two brokerages predicted the central bank's tightening cycle would conclude before the month-end meeting. The firms now believe persistent inflation risks and high energy prices justify further monetary tightening. Prior to this update, both institutions anticipated that ECB policy would not include a rate hike at its December session. Analysts at these organizations cite resilient economic growth and sustained energy costs as primary drivers for the new outlook. Consequently, borrowing costs across the eurozone could remain elevated longer than earlier market expectations suggested. Energy prices have been a significant factor, having risen from recent peaks but staying above $95 a barrel despite some easing. The ongoing conflict in Iran continues to influence fuel supply concerns, which brokers warn could drive broader inflationary pressures. As a result, financial markets have largely already accounted for this specific 25-basis-point increase scheduled for the September 10 policy meeting. Current data indicates a 99.2% probability of the predicted quarter-point adjustment according to LSEG figures.
