After a pause in July, the European Central Bank (ECB) is widely expected to raise rates in September. Euro area growth remains resilient, expanding by 0.4% in the second quarter despite persistent geopolitical tensions. Higher oil and gas prices pushed headline inflation to 3.3% year on year in August, while inflationary pressures continue to stem mainly from energy.
Our expectations:
- The deposit facility rate will likely be raised to 2.5%.
- The ECB is likely to reaffirm its data dependent approach without offering guidance on the future of rates.
- As in July, Christine Lagarde is expected to stress the absence of significant second-round effects from energy prices, with inflation expectations remaining anchored and no sign of acceleration in wage growth. The ECB wage tracker points to negotiated wages rising by 2.3% in 2026, after 3.2% in 2025.
- The economic projections could show stronger growth in 2026 and 2027 than those published in June, following a first half of 2026 that came in ahead of the ECB’s expectations. In June, it forecasted 0.8% and 1.2% respectively, which is still in line with current market forecasts. Inflation is likely to be revised upwards on the back of energy, gas in particular, while core inflation projections should be little changed, at 2.5% in both 2026 and 2027, given limited second-round effects, before converging towards 2% by 2028. Riks to inflation remain tilted to the upside, while those to growth are more balanced.
In conclusion
This second hike would take the deposit rate to the upper end of the neutral range, reinforcing the ECB’s cautious, data-dependent stance. Should the central bank nonetheless judge it necessary to move policy into restrictive territory to contain inflation risks, further hikes beyond 2.50% could prove necessary, all the more so given that growth continues to surprise on the upside.
Source: Bloomberg, figures as at end-August 2026.
Completed 07/09/2026. This commentary is provided for information purposes only. The opinions expressed by Crédit Mutuel Asset Management are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. The information contained in this publication is based on sources we believe to be reliable. However, we do not guarantee its accuracy, completeness, validity, or relevance. Published by La Française Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. Crédit Mutuel Asset Management: 128 Boulevard Raspail, 75006 Paris is an asset management company approved by the Autorité des marchés financiers under n° GP 97 138 and registered with ORIAS (www.orias.fr) under no. 25003045 since 11/04/2025. Public Limited Company (Société Anonyme) with share capital of €3,871,680, RCS Paris n° 388 555 021, Crédit Mutuel Asset Management is a subsidiary of Groupe La Française, the asset management holding company of Crédit Mutuel Alliance Fédérale.
