Why Analysts Expect Another ECB Rate Hike in December

The European Central Bank’s September rate increase changed the near-term debate. Rather than treating the tightening cycle as finished, several major banks began to expect another quarter-point increase in December. The reason is not simply that the ECB raised rates—it is that policymakers paired the move with a warning that inflation could stay above target for an extended period amid renewed energy-price pressure. 134

What the ECB did in September

On 10 September 2026, the ECB raised its three key interest rates by 25 basis points. The deposit facility rate—the rate the Governing Council uses to steer its policy stance—was set to rise to 2.50% from 16 September, while the main refinancing and marginal lending rates were set at 2.65% and 2.90%, respectively. 12

That decision was the second quarter-point increase since June. Reporting at the time linked the shift in the inflation outlook to the Middle East conflict and higher energy prices. 45

Why a December hike became the base case for some banks

Reuters reported that Goldman Sachs, Citigroup and Barclays expected a further ECB rate increase after the September decision. Their central concern was that inflation could remain elevated for longer than previously expected. 3

A further 25-basis-point move would take the deposit rate from 2.50% to 2.75%. Goldman Sachs’ published research summary also forecast a December increase to that level and saw upside risk to a 3.00% peak rate if inflation pressure remained persistent. 6

The important change was therefore one of policy duration. Earlier expectations that rate increases had peaked were displaced by a “higher for longer” scenario: rates would remain restrictive, and may need to rise further, until policymakers were more confident inflation was returning sustainably to the ECB’s 2% objective. 34

Energy inflation is the immediate catalyst

Higher interest rates cannot create additional energy supply. But the ECB must still consider whether an external energy shock could spread into broader prices, wages and inflation expectations.

The ECB said the Middle East conflict was continuing to generate inflation pressure and that inflation was expected to remain well above target for an extended period. 4 That combination matters because a temporary increase in oil or gas costs may fade on its own, while more persistent price-setting and wage effects would be harder to reverse.

This is why the outlook depends heavily on whether energy prices stabilize and whether underlying inflation shows convincing signs of easing. A sustained easing would weaken the argument for further tightening; continued energy pressure and broader inflation persistence would reinforce it.

What bank forecasts do—and do not—show

The available reporting supports a December-hike expectation from Goldman Sachs, Citi and Barclays. It also says Citi anticipated the possibility of an additional increase in March 2027. 3

The material provided does not independently verify the specific forecasts attributed to Commerzbank or Morgan Stanley, including a forecast of only one 2027 rate cut. Those claims should not be treated as established on the evidence available here.

That distinction is important: bank forecasts are scenarios, not ECB commitments. The ECB did not give forward guidance on its next move, according to BBVA Research’s account of the September meeting. 8

Growth resilience supports the hawkish case—but only up to a point

The case for another increase is stronger if the euro area can absorb tighter financial conditions without a severe downturn. Some signs of resilience were visible in Germany’s September ZEW survey: economic expectations edged up to 34.7 from 34.2, while the assessment of current conditions improved sharply to -47.1 from -61.1.

Those figures still describe an economy with weak current conditions, not a broad-based boom. They are better read as limited evidence against an immediate collapse than as a blank cheque for aggressive tightening.

The risk of overtightening

The counterargument is that the shock is largely supply-driven. Rate increases can restrain demand and help prevent second-round inflation effects, but they also make borrowing more expensive for households, firms and governments.

That creates a difficult trade-off for the ECB:

• Tighten too little, and elevated inflation could become more persistent.
• Tighten too much, and the ECB could intensify weakness in an economy already facing high energy costs and restrictive financing conditions.

The September decision suggests policymakers judged the inflation risk serious enough to act. Whether they do so again in December will depend on the incoming evidence—not only on energy prices, but also on broader inflation, activity and signs of domestic price persistence.

Bottom line

A December quarter-point ECB hike became a prominent bank forecast because the September decision combined an actual rate increase with a notably hawkish inflation message. The energy shock raised the risk that inflation would stay above the ECB’s 2% target for longer, while signs of economic resilience made additional restraint appear feasible to some analysts. 134

But a move to 2.75% was still a forecast, not a certainty. The more quickly energy pressure and underlying inflation ease, the weaker the case for extending the tightening cycle into 2027.