European Central Bank: Quarterly hikes still baseline – Nordea

Nordea analysts anticipate two more 25 basis point rate hikes from the European Central Bank in December and March 2027, despite more aggressive market pricing. They cite higher energy costs and Middle East risks, but still consider a step-by-step quarterly hiking approach in line with current data and ECB statements. While financial market pricing has surged, it currently stands above Nordea's baseline forecast of two additional 25bp hikes.

Rapidly rising energy prices and uncertainty in the Middle East in the coming months still fuel rate expectations. The analysts maintain that their forecast remains a reasonable baseline for the ECB, as it aligns with recent economic data and central bank communication. However, the central bank's communication lacks urgency and suggests no faster pace of rate hikes than the quarterly hikes currently planned.

Broader price pressures and second-round effects are expected, but the outlook still aligns with a gradual rise in interest rates. The recent escalation of the Middle East war and another significant increase in gas prices have shifted risks towards faster hikes, including a potential hike at the October meeting.