Nomura’s Global Markets Research team, led by Andrzej Szczepaniak, George Buckley, and Josie Anderson, forecasts that the European Central Bank (ECB) will raise its deposit rate by 25 basis points to 2.50% at the 10 September meeting, followed by a pause in further rate hikes [1]. The analysts cite rising price pressures due to the ongoing US-Iran war and the euro area’s economic resilience as key factors making the September rate hike highly likely, regardless of scenario, similar to the June rate hike [1].
While Nomura expects no additional rate hikes after September, they note that risks are skewed toward further tightening, particularly if Brent crude oil prices remain elevated. The team highlights that the ECB’s future actions will depend on the duration and severity of the Iran war and the trajectory of Brent crude oil prices, which are currently around $95 per barrel [1]. If the conflict persists through the end of September or October and oil prices stay in the $80-100 per barrel range, an additional ECB rate hike could occur in December [1].
Furthermore, if Brent crude oil prices rise above $100 per barrel and remain at that level until the end of September or mid-October, Nomura suggests the ECB might advance its anticipated December 2026 hike to the October meeting, scheduled for 29 October [1]. Despite these risks, Nomura expects ECB President Christine Lagarde to adopt a dovish tone compared to market expectations and avoid pre-committing to further rate increases [1].
CONCLUSION
Nomura anticipates a 25bp ECB rate hike in September, followed by a pause, but warns that persistent high oil prices could prompt additional tightening. The ECB’s future policy path remains dependent on geopolitical developments and energy markets, with Lagarde expected to maintain a cautious, non-committal stance.