Nomura’s Andrzej Szczepaniak, George Buckley and Josie Anderson expect the ECB to keep the depo rate at 2.50% on 29 October, maintaining current quantitative tightening guidance. They project further rate hikes in December 2026 and March 2027, taking the terminal rate to 3.00%, and see current market pricing of around 75bp of hikes by September 2027 as excessive.
Nomura sees cautious but hawkish ECB
“We forecast the ECB will leave the depo rate unchanged at 2.50% on 29 October. We believe the ECB will want to wait and evaluate how the previous rate hikes have affected the euro area economy, as well as assess how wage negotiations have evolved in Q4 2026, which so far appear benign for second-round inflation effects.”
“Markets price around 75bp in hikes by September 2027, which we perceive as excessive, and we believe Mme Lagarde will fail to validate such pricing during the press conference Q&A. As a result, we would expect a rally during the press conference and believe markets will price marginally less for the ECB’s terminal rate by the end of the press conference (14:45 London time) than at the outset (13:45 London time).”
“We expect further rate hikes in December 2026 and March 2027, raising the depo rate to a terminal level of 3.00%. We believe the Iran war has resulted in elevated commodity energy prices for sufficiently long to warrant two further rate hikes. We believe the December rate hike is a done deal, while March will eventually be seen as necessary for risk management purposes.”
“We believe the decision to leave rates unchanged at the October meeting will be unanimous. The ECB is in no rush to raise rates, hiking pre-emptively to limit the risk of second-round inflation effects.”
“In the Q&A (13:45 London time), we expect Mme Lagarde to face questions on the path for rates beyond October, and in particular, how many more times the ECB will raise rates. We believe Mme Lagarde will signal as strongly as possible that the ECB will hike in December, similar to what she did in April and July for the June and September rate hikes, respectively.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
