Standard Chartered joins major banks in betting on December ECB rate hike

Standard Chartered ​expects the European Central Bank to ​raise its deposit rate ‌by 25 ​basis points to 2.75% in December, reversing its previous call for a pause, after stronger-than-expected inflation ‌and resilient economic activity reinforced the case for further tightening.

The brokerage changed its forecast after euro zone inflation accelerated more than expected in September, driven largely ‌by higher energy prices, while recent business activity data pointed to a ‌more resilient economy than previously anticipated. Major Wall Street banks have broadly coalesced around expectations for another ECB rate hike in December.

ECB, along with several other major central banks, ⁠raised interest ​rates last month ⁠as policymakers sought to contain inflation risks stemming from higher energy costs and resilient economic growth. "We ⁠think the ECB will opt to take rates slightly into restrictive territory," the ​brokerage's economists wrote in a note, adding that policymakers may seek insurance ⁠against the risk of higher energy prices feeding through to wages and broader price pressures.

The ⁠ECB ​will next meet on October 29, but Standard Chartered said a December rate hike is more likely, as policymakers will then have updated ⁠economic forecasts and another round of inflation data, despite limited signs of second-round ⁠price pressures. Money markets ⁠are pricing in a roughly 65% probability that the ECB will raise rates by 25 basis points in ‌December, LSEG data ‌showed.