Economists agree: ECB will hike rates to 2.75% in December, Reuters poll shows
The European Central Bank (ECB) is expected to raise its deposit rate by 25 basis points to 2.75% in December, according to a Reuters poll published on Thursday. All 71 economists surveyed expect a hike next month. Of those, 46 expect the deposit rate to peak at 2.75%, while 25 see another hike, most likely in the first quarter of 2027.
Economists raised their inflation forecasts from a month ago and now expect Eurozone inflation to remain around twice the ECB’s 2% target through at least the second quarter of 2027.
They see inflation averaging 3.1% in 2026 and 2.8% in 2027, up from 3.0% and 2.6% in the October poll. Core inflation is also expected to pick up, averaging 2.6% this quarter and 2.8% in the first quarter of 2027.
The growth outlook also improved. Economists now expect the Eurozone economy to expand by 1.1% in 2026 and 1.3% in 2027, up from 1.0% and 1.2%, respectively, in the October poll.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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