ECB Interest Rate Prep

On Thursday the 11th of September at 08:15 ET, the ECB is set to release the results of their latest monetary policy meeting.
Here are some views on what to expect.

Expectations

ECB Interest Rate
Forecast 2.15%

ECB Deposit Rate
Forecast 2%

September 4th
[07:44 ET] Poll: ECB to hold deposit rate at 2.00% on September 11th – 66 of 69 economists
[07:44 ET] Poll: ECB to leave deposit rate at 2.00% until end-2025 – 40 of 69 economists; 28 see cut to 1.75%; one sees 1.50%

September 3rd
[00:00 ET] ECB’s Dolenc: Next Rate Move Could Be a Cut or a Hike

Commentary
ING
We expect the ECB to remain on hold at this week’s meeting, although the debate between supporters of holding steady and those favouring a rate cut will likely be more heated than markets have priced in. The minutes of the July meeting, as well as official ECB comments since the end of the summer break, have stressed that the bar for yet another rate cut from the central bank is set high.

All in all, the discussion at the ECB meeting looks set to be more controversial than markets are currently pricing in. For us, this week’s meeting is an example that central bank watchers sometimes need to distinguish between what a central bank should do and what it will do. While we still have some sympathy for another, rather pre-emptive, rate cut to avoid unwarranted Euro strengthening and inflation undershooting, we also see a majority at the ECB not sharing this view and instead stressing signs of resilience and recent hard data.

Unicredit
We expect the ECB to leave interest rates unchanged on Thursday, in a decision that is likely to be supported by an overwhelming majority of the Governing Council (GC), if not unanimity. With monetary policy in a “good place” to deal with high uncertainty, we do not think ECB’s Lagarde will provide any meaningful policy signals for the months ahead.

The ECB’s baseline scenario continues to hold. Inflation is back to 2% on a sustainable basis, and the ongoing easing trend in wage growth is likely keeping the GC confident about a further leg of core-price disinflation down the road. So far, economic activity has been weathering the storm of higher US tariffs, even somewhat better than expected given the resilience of business sentiment (also in the manufacturing sector) and of the labour market in the wake of high trade-policy uncertainty.

Given the outlook for inflation, the ECB will probably leave the door open for a further rate cut if downside risks were to intensify. We forecast that the deposit rate will remain at 2% throughout 2026, although markets are unlikely to completely price out a final 25 bps rate cut over the next three to six months, when the bulk of the tariff-related drag on growth is expected to materialise.

ANZ
We expect no change in interest rates at this week’s ECB meeting The economy is holding up well and policy rates have been cut to neutral levels. However, we expect the ECB to maintain its easing bias, and we maintain our view that it will cut rates once more by 25 bps to 1.75% in Q4, probably in December. The likelihood that inflation will undershoot target later this year and in the first half of 2026 supports this view. We expect an inflation undershoot to be temporary as growth is forecast to firm and monetary easing works its way through the real economy.