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Nomura’s Euro area team expects the European Central Bank to raise rates by 25 basis points to 2.50% at the 10 September meeting, citing higher HICP inflation and resilient growth. They highlight hawkish comments from ECB officials and note that Brent and Dutch TTF price dynamics could shape additional tightening risks into December 2026.
Hawkish officials and energy-linked risks
“We expect the ECB to raise rates at its 10 September meeting by 25bp to 2.50% in light of rising HICP inflation, due to the Iran war, and the euro area’s economic resilience. There are clear risks of further rate hikes beyond September, however.”
“In a similar vein the ECB’s Radev made hawkish comments yesterday, suggesting that the neutral rate is “probably around 2.50%” and that the ECB may eventually be required to raise rates into restrictive territory.”
“We maintain our view that the ECB will raise rates by 25bp at its 10 September meeting to 2.50%. In the near term, market pricing for the ECB by December 2026 is driven largely by the price of Brent crude oil, as we continue to focus on US-Iran headlines.”
“However, there are clear risks that a December rate hike could occur should the price of Dutch TTF natural gas rise further. The bulk of the pass-through of moves in the price of Brent crude oil is largely contemporaneous and occurs via the vehicle fuel component within the HICP basket.”
“However, the pass-through of moves in the price of Dutch TTF natural gas is more lagged and gradual, resulting in more persistent and broader inflationary pressures.”
