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ECB seen likely to deliver another 25bp depo rate hike amid energy risks

Societe Generale expects the depo rate to reach 2.75% in December, warning that higher oil and gas prices could keep inflation elevated into 2027 and push up the eventual terminal rate.

Reported · Written up by our desk · Major Pairs

Societe Generale strategist Kenneth Broux expects the ECB to carry out a second 25 basis point hike to the depo rate, arguing that wage dynamics and updated staff forecasts will shape how far tightening goes. The bank points to higher oil and natural gas prices as a key risk factor, warning that sustained energy and food shocks could raise stagflation concerns. It also flags a higher inflation plateau, saying this may require a higher terminal rate than markets currently price.

FXStreet relays the view that the ECB previously forecast headline inflation to rise to 3.4% in the third quarter, up from 3.3% in August, and then remain elevated until early 2027. Broux says an even higher plateau now appears likely and could mean inflation needs a higher terminal rate to return to target in 2028.

On pricing, the forward curve is seen as already embedding a peak depo rate just over 3%, implying two more increases after the current move. Societe Generale’s economists pencil in an additional +25bp to take the depo rate to 2.75% in December, while noting the 10-year Bund yield has been closely tracking natural gas since July.

For EUR/USD, FXStreet notes that a high concentration of option expiries should help keep the euro near the 200-day moving average as the market weighs the ECB outlook.

Latest closeNat gas $2.805 ▼3.8%|EUR/USD 1.164 ▲0.1%

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