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ECB Interest Rate Hike Set for December 2026 as Inflation Hits Double the Target

November 14, 2026

An ECB interest rate hike in December 2026 now looks all but certain. All 71 economists polled by Reuters between 10 and 12 November expect the European Central Bank to lift its deposit rate to 2.75% next month, in what most see as the final rise of this cycle, though a large minority expect one more early next year. The reason is inflation: eurozone prices rose 4% in October, a three-year high and double the bank’s 2% target.

The December move would be the ECB’s third rise of the year, after increases in June and September. It would also push the deposit rate above the bank’s own estimate of the “neutral” range — 1.75% to 2.50% — the level at which rates neither stimulate nor restrain the economy. Going above it means the ECB would be deliberately cooling demand.

The ECB interest rate hike in December 2026: what the poll found

The poll’s headline finding is the unanimity: every one of the 71 economists surveyed expects a December rise. But they disagree about what follows. A 65% majority — 46 of the 71 — think the deposit rate will peak at 2.75% in December. More than a third, 25 economists, expect another increase, most likely in the first quarter of 2027. Financial markets lean the hawkish way: they are pricing in two to three hikes by the end of next year.

Fabio Balboni, chief European economist at Wellington Management, called the December decision all but made. “The December hike is almost on autopilot,” he told Reuters. But he still rates a further rise in March as a real possibility: “March is still a possibility, I would say 50/50.”

Why inflation forced the ECB’s hand

Eurozone inflation reached a three-year high of 4% in October, and economists have raised their forecasts since last month. They now expect inflation to average 3.1% this year and 2.8% next, up from 3.0% and 2.6% in the previous survey — and to stay around twice the ECB’s 2% target until at least the second quarter of 2027.

The deeper worry is “second-round effects”. When energy prices stay high, the costs spread: transport and heating become dearer, firms pass the costs on, and workers seek higher pay to recover lost spending power. Once that cycle sets in, it is much harder to break.

Underlying pressures are already strengthening. Core inflation — which strips out volatile food and energy prices — was 2.2% in October, and economists expect it to average 2.6% this quarter and 2.8% next. Balboni expects wages to add to the pressure: “It’s unrealistic to expect there will not be any pickup in wages.”

The energy picture is mixed. Oil futures have fallen by more than 20% in recent weeks, which should ease some pressure. But natural gas storage is low heading into winter, and the outlook for peace in the Middle East is still unclear. Jan von Gerich, chief analyst at Nordea, warned against reading too much into cheaper energy: “If we get a cold winter, then we could easily see gas prices really spiking.”

A global turn toward higher rates

The ECB is not acting alone. The world’s major central banks have spent 2026 reversing course, moving from cutting interest rates to raising them as energy-driven inflation has returned. The Bank of England raised its Bank Rate to 4% on 5 November, its first increase in more than three years. Australia’s central bank lifted its cash rate to 4.85% in early November. The US Federal Reserve raised its benchmark rate in September and held it at its late-October meeting, with Governor Christopher Waller leaning toward another rise in December. In Pakistan, the State Bank raised its policy rate to 12% in late October, citing the same pressures — high global energy prices and a worsening inflation outlook.

Against that backdrop, the ECB’s December decision is less a surprise than a confirmation. The question is no longer whether the bank will raise rates, but how far it will go.

What the December decision will signal

Growth, at least, is holding up. Economists raised their eurozone growth forecasts slightly, to 1.1% this year and 1.3% next, from 1.0% and 1.2% in the October survey. Resilient growth gives the ECB room to keep rates higher for longer — one reason it is comfortable moving above the neutral range.

The December meeting will also show how the bank reads the winter. If gas prices spike during a cold winter, the case for a further rise in March strengthens. If energy prices keep falling and core inflation eases, the December rise may indeed be the last.

What this means for borrowers and savers

For households and businesses in the eurozone, a higher deposit rate means borrowing gets more expensive. The deposit rate is the interest the ECB pays banks on money they park with it overnight, and it anchors the rates banks charge each other — and, in turn, the rates on mortgages, business loans and credit. Savers should eventually see better returns on deposits, although banks are usually slower to pass rises on to savers than to borrowers.

For readers in Pakistan, the direct effect is small — few Pakistanis borrow in euros — but the direction matters. When the world’s big central banks all tighten at once, global borrowing costs rise and emerging markets, including Pakistan, feel the pressure through higher import costs and tighter financial conditions.

What this means

The ECB’s December rate rise is now the market’s base case, backed by every economist in the Reuters poll. Inflation at 4% — double the target — has left the bank with little choice, and the only real debate is whether December is the last move or the second-to-last. With markets pricing in more rises and a cold winter still to come, borrowers across Europe should plan for higher rates well into 2027.

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