Barclays and Goldman Sachs Predict ECB Interest Rate Hike Amid Inflation Concerns

Barclays and Goldman Sachs both anticipate a 25-basis point interest rate hike by the European Central Bank (ECB) in December due to high inflation projections and escalating energy prices. The ECB's recent moves and geopolitical tensions, particularly between the U.S. and Iran, contribute to these economic forecasts.

Barclays predicts a 25-basis point hike in interest rates by the European Central Bank (ECB) this December. Their anticipation follows higher inflation forecasts and rising energy costs fueled by ongoing tensions between the U.S. and Iran. As of Thursday, traders are reportedly pricing in a 93.9% probability of this rate increase, according to LSEG data.

The ECB's decision comes amid new projections suggesting that inflation will persist above the 2% target for some time. Goldman Sachs also joins Barclays in forecasting this rate adjustment, asserting that such a shift would move rates into slightly restrictive territory. With military actions impacting oil prices, imported inflation concerns grow within the eurozone.

According to Barclays, the ECB expects inflation to reach its 2% target by late 2027, following incremental 25-basis point hikes. ECB President Christine Lagarde labeled the bank's recent decision a 'no-brainer,' emphasizing data-driven policy-making. Though an October rate change seems unlikely, Barclays foresees December as the pivotal moment for an adjustment based on updated economic forecasts.