ECB’s Stournaras warns against rushing rate hike

European Central Bank policymakers are weighing whether to raise interest rates again next month, as war-fueled energy costs keep inflation above the 2% target, with views diverging on how aggressively to act.

Stournaras Urges Caution

ECB Governing Council member Yannis Stournaras said on Saturday that the central bank must remain "vigilant" on upside inflation risks but should avoid acting hastily, according to Bloomberg. Speaking on the sidelines of a meeting of European finance ministers and central bankers in Dublin, the Greek central bank chief said an October rate increase could not be ruled out if energy costs surge or September inflation data worsens.bloomberg+1

However, Stournaras indicated that if uncertainty persists, policymakers "can afford to pause and await the subsequent forecast round rather than rushing into action". He pointed to a continuous wave of supply-side shocks alongside demand pressures from fiscal expansion and booming artificial intelligence investment as reasons for ongoing caution.investing

Financial markets are currently pricing in a high probability of a quarter-point deposit rate increase to 2.75% at the ECB's next meeting, with expectations of further tightening to follow. Stournaras noted that signs of decelerating activity or a potential diplomatic resolution in the Middle East — which could quickly lower energy prices — would weigh against additional hikes.investing

Italy Pushes Back on Rate Hikes

Italy's Finance Minister Giancarlo Giorgetti offered a sharper critique on Friday, arguing that ECB rate increases do not address rising consumer prices across the euro area. Giorgetti said inflation stems from a supply shock rather than an "overheated economy" and "excessive demand" that would require restrictive monetary policy. He warned that inflation will continue to rise if the two ongoing wars persist, creating further problems for families and businesses.investing

ECB President Christine Lagarde, also present in Dublin, declined to comment on the bank's next moves but emphasized that interest rates do not move in lockstep with energy prices. The ECB has already raised rates twice since the outbreak of war in Iran.investing+1

ING Forecasts a Final "Insurance" Hike

ING, one of Europe's largest banks, expects the ECB could deliver one more "insurance" rate hike at its December 2026 meeting, citing "hidden hawkish messages" in ECB forecasts and the risk that oil near $100 a barrel keeps inflation sticky. The bank views any December move as a final adjustment rather than a new hiking campaign, calling market expectations for at least two more hikes in 2027 "overdone" unless oil prices trigger broader second-round inflation effects.finimize