Rabobank strategists Bas van Geffen and Elwin de Groot anticipate that the European Central Bank (ECB) will raise the deposit facility rate by 25 basis points to 2.75% in December, citing higher energy price forecasts as the primary driver for this move [1]. They emphasize that this is not a shift to a stronger policy response, but rather a reaction to the energy shock, which is expected to impact inflation more significantly and earlier than economic activity [1]. Rabobank forecasts that energy prices should begin to abate from March, limiting the need for further hikes and making any additional increases largely transitory. They expect the ECB to revert any rate increases above the current 2.50% in the second half of 2027, and have not factored in a March hike due to the lagged effects of monetary policy [1].
Meanwhile, Nordea strategists expect the Federal Reserve (Fed) to deliver two additional rate hikes, supported by resilient US economic growth, persistent inflation, and continued labor-market strength [2]. They argue that monetary policy is not yet sufficiently restrictive, with the median dot for year-end implying another hike [2]. Nordea forecasts one hike to be delivered soon, followed by another next year, as inflationary pressures are likely to persist. Risks to their rate outlook remain tilted to the upside [2].
Nordea highlights that limited supply of new labor and continued job growth could further tighten the labor market, potentially putting downward pressure on the unemployment rate and leading to faster wage growth and renewed wage pressures, making inflation more persistent [2]. Additionally, massive AI-related demand is supporting overall economic activity, with investment flowing into data centers and competing for scarce resources such as electricity, commodities, and skilled workers. The Fed has specifically noted higher wages in specialty construction trades linked to the AI buildout [2].
Both Rabobank and Nordea see upside risks to inflation and emphasize the need for further tightening to anchor expectations and prevent second-round effects. However, Rabobank expects ECB rate hikes to be temporary and potentially reversed in the second half of 2027, while Nordea sees the Fed's policy stance as needing to remain restrictive given ongoing economic strength and inflationary pressures [1][2].
CONCLUSION
Both the ECB and Fed are expected to implement further rate hikes in response to persistent inflation and sector-specific pressures, with Rabobank forecasting a single, temporary hike for the ECB and Nordea anticipating two additional hikes by the Fed. The market impact is high, as central banks signal continued vigilance against inflation, though the ECB's tightening may be reversed in the longer term while the Fed's stance remains firmly restrictive.