ECB Expected to Raise Deposit Rate to 2.5%

Economists surveyed by Bloomberg expect the European Central Bank to raise its deposit rate by 25 basis points to 2.5% next Thursday. While many economists predict this will be the final increase through 2027, market traders anticipate approximately three additional hikes by mid-next year.

The bank is managing these decisions against a backdrop of rising oil prices, which are approaching $100 a barrel, and increased natural gas costs driven by conflict between the United States and Iran over the Strait of Hormuz.

Internal views on the trajectory of rates vary. Governing Council members Gediminas Simkus and Dimitar Radev suggest further hikes may be necessary, with Radev identifying September and December as potential windows for lifting borrowing costs. Conversely, Executive Board member Isabel Schnabel and other officials emphasize data dependence and the urgency of preventing second-round inflation effects on wages.