Poll: ECB Expected to Pause Rate Hikes in July, with a Final 25bps Increase Likely in September
Alina Collins
A Bloomberg survey shows the ECB will hold rates next week, then raise by 25 bp to 2.5% in September — completing a brief tightening cycle triggered by the Iran war's oil-price surge. But if the Middle East outlook improves, even that final hike may never land.
What happens at next week's meeting?
Every economist polled expects rates unchanged in July — the ECB is choosing to wait.
This means → the Governing Council needs more data to tell whether inflation is genuinely fading or just pausing.
September is the real decision point — by then the ECB will have fresh quarterly projections to guide its call.
What does the 2.5 % target mean?
Economists broadly agree that a deposit rate of 2.5 % marks the ceiling for this cycle.
In plain terms = this tightening round was forced by the Iran war → surging oil → an inflation rebound. It was always meant to be short, not a repeat of 2022-2023's extended hikes.
This reflects the Council's core read: the shock is external and temporary, so the policy response should be, too.
What are officials saying right now?
Austria's central-bank governor Martin Kocher and Executive Board member Piero Cipollone said this week there is no evidence wages are locking in further price pressure.
June inflation fell more than expected; services inflation — a key gauge of domestic demand pressure — also eased.
Bundesbank president Joachim Nagel struck a more cautious tone: borrowing costs are "appropriate," but the ECB will maintain a "vigilant stance" and assess data meeting by meeting.
Is the September hike a done deal?
HSBC economist Chris Hare was explicit: a September hike is not a certainty.
This means → if Middle East peace talks advance and energy supplies normalize, that final 25 bp may never be delivered.
Bloomberg Economics' view: June disinflation removed the urgency, but elevated commodity prices still tilt the Council toward one more hike in September as a closing move.
After the peak — when do cuts begin?
The survey median puts the first rate cut at September 2027 — a full two years after the expected peak.
Four economists, including Bloomberg Economics, see cuts as early as March 2027.
In plain terms = the market is deeply split on how long rates stay elevated. The Middle East is the biggest variable — the longer the conflict drags on, the longer high rates persist.
What should you actually watch for next week?
Deka Bank economist Kristian Toedtmann argues next week's focus is not the rate decision itself but the policy communication.
About 41 % of economists expect the ECB to signal something about the rate path ahead, even though President Christine Lagarde recently reaffirmed she offers no forward guidance.
This reflects the market's real anxiety: not "will they hike in July?" but "when does this tightening cycle truly end?"
Content is for reference only, not financial advice.