ECB set to raise rates Sept. 10, then pause, poll finds

The European Central Bank will raise interest rates on September 10 for the second and final time this year, capping what would be its shortest hiking campaign in 15 years, according to a Reuters poll of economists published on Wednesday.wkzo+1

All 65 economists surveyed between August 31 and September 3 predicted the ECB would lift its deposit rate by a quarter-point to 2.50%, up from the 83% consensus in an August poll. The unanimity reflects growing conviction that the central bank will act next week but then hold steady, even as eurozone inflation accelerated to 3.3% in August from 2.9% in July, driven largely by energy costs that surged 14.3% year-over-year, according to Eurostat's flash estimate.reuters+1

A Cautious End to Tightening

About 91% of economists in the poll expect the deposit rate to end 2026 at 2.50%, while 78% see it staying there through mid-2027. The ECB last raised rates in June, when it lifted the deposit rate to 2.25% from 2.00%.centralbank+2

"We still find it hard to see, amid public finance woes and surging bond yields, that the ECB would really be willing to add more fuel to the fire," said Carsten Brzeski, global head of macro at ING, as quoted by Reuters. "It's difficult to envisage the ECB being willing to risk a recession to tackle what is still a textbook supply-side shock."reuters

ECB policymakers themselves have shown little appetite to signal further tightening after September, partly due to well-anchored long-term inflation expectations, Reuters reported in late August, citing anonymous sources familiar with internal discussions.reuters

War and Oil Cloud the Outlook

The restraint comes against a backdrop of renewed Middle East hostilities and volatile energy markets. Brent crude has climbed sharply in recent days after the United States resumed airstrikes on Iran. Global bond yields have also surged, with U.S. 10-year Treasury yields reaching their highest since November 2023 and Japan's 10-year yield exceeding 3% for the first time since 1996.chosun

Economists raised their 2026 eurozone inflation forecasts six times this year to 2.9%, the steepest upward revisions in a year since 2022. Inflation is not expected to return to the ECB's 2% target until late 2027.wkzo

If the September hike proceeds as expected, it will echo the ECB's 2011 episode, when it raised rates twice in response to rising oil prices — moves many policymakers now regard as a policy mistake. As SEB euro area economist Pia Fromlet told Reuters, "The reason why they will stop hiking is we still think inflation will approach target during the course of next year. However, there is an upside risk to our inflation forecast".reuters+1