European Central Bank: September hike path and oil risks – Nomura

Nomura’s Global Markets Research team, led by Andrzej Szczepaniak, George Buckley and Josie Anderson, expects the ECB to raise the depo rate by 25bp to 2.50% at the 10 September meeting and then pause. The analysts see risks skewed toward further tightening if Brent stays elevated, but anticipate Lagarde will sound dovish versus market pricing and avoid pre‑committing to additional hikes.

September hike seen then extended pause

"We forecast the ECB will raise rates by 25bp at its 10 September meeting, lifting the depo rate to 2.50%. We believe that rising price pressures, owing to the ongoing US-Iran war, and the euro area’s economic resilience, suggest a September rate hike is a done deal. Importantly, we expect the September rate hike to be robust under all scenarios, including the milder one, as was the June rate hike."

"After the September meeting, we expect no more rate hikes. That said, risks are clearly skewed toward further hikes. A lot depends on the longevity and severity of the Iran war, and whether the price of Brent crude oil stays around $95/bbl, rises higher or falls back down to pre-war levels as happened when the Islamabad Memorandum was in force."

"If the re-escalation drags on to end-September or end-October, and remains in the range $80-100/bbl, we would expect the ECB to hike additionally in December. That said, if the price of Brent crude oil rose to above $100/bbl and remained there until end-September or mid-October, the ECB may bring forward its December 2026 hike to October (the October meeting is 29 October)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)