Bloomberg Survey: ECB to Deliver Final 25bp Hike Next Week, Holding at 2.5% Through 2027

The Quick Take

• A majority of economists surveyed by Bloomberg expect the ECB to raise its deposit rate by 25 basis points to 2.5% at next week's meeting
• The survey points to a terminal rate hold through 2027, marking a more dovish long-run trajectory than previously expected
• The expected pause signals growing confidence that eurozone inflation is on track toward the ECB's 2% target without further tightening

A Bloomberg survey of economists reveals broad consensus that the European Central Bank will raise its deposit rate by a quarter-point to 2.5% at its next week's meeting, and then hold that level through 2027. This represent a notably more dovish trajectory than earlier cycle expectations, which had anticipated further hikes into the 2.75-3.0% range. The survey outcome reflects growing analyst confidence that eurozone inflation dynamics — softening energy prices and moderating wage growth — are sufficiently on track to make a longer holding period credible without sacrificing the ECB's credibility.

A terminal ECB rate of 2.5% held through 2027 has significant implications for eurozone credit markets and sovereign bond spreads. Peripheral euro area government bonds from Italy, Spain, and Portugal would benefit from the removal of further tightening risk, narrowing spreads against German Bunds. European bank profitability, which surged as policy rates rose from negative territory, faces a more stable but lower net interest margin environment if the holding period extends as forecast. Export-oriented European corporates would see reduced financing cost uncertainty, potentially supporting investment planning and M&A activity.

Investors should watch the ECB's press conference language for any asymmetric risk signals — specifically whether President Lagarde opens the door to earlier rate cuts if growth deteriorates beyond current projections, or flags lingering inflation risks that could delay eventual easing. The key macro variable is eurozone core CPI: any re-acceleration driven by services inflation or second-round wage effects would invalidate the consensus hold scenario and revive tightening expectations. Also watch Euro-dollar exchange rate dynamics — a stronger euro from rate differentials moderates imported inflation and gives ECB more room to stay on hold.

Synthesized from 1 source.