ANZ Predicts Further ECB Rate Hike in December Amid Middle East Tensions

ANZ Bank has forecasted a further increase in the European Central Bank's (ECB) deposit facility rate to 2.75% in December, following a recent hike that raised the rate to 2.5%. The bank estimates that there is a 90% probability that markets have already priced in an additional rate increase in October. This outlook is influenced by the ongoing conflict in the Middle East and its impact on energy prices, which ANZ believes could prompt the ECB to continue its tightening cycle.

In contrast, ING Bank has taken a more cautious stance, characterizing the recent 25 basis point hike as an 'insurance' move rather than the start of a prolonged tightening phase. ING argues that the ECB's decision was primarily aimed at preemptively addressing potential inflation pressures from rising energy costs, rather than responding to an overheating economy. The bank highlights that core inflation measures and inflation expectations show little evidence of second-round effects from higher energy prices, suggesting that further hikes may not be necessary unless conditions change significantly.

Both banks agree that the trajectory of future rate decisions will depend heavily on developments in the Middle East and energy markets. ING notes that the ECB's updated projections indicate a stable headline inflation rate of 3% for this year, with slight upward revisions for 2027 and 2028. However, ING cautions that these projections do not fully account for recent increases in bond yields and oil prices, which could alter the economic landscape significantly.

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Source: KLEA News