ECB to Hike in June and September, Economists Forecast
65d ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
ECBinterest-rates
Fazen Markets Editorial Desk
Collective editorial team · methodology
Trades XAUUSD 24/5 on autopilot. Verified Myfxbook performance. Free forever.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. Vortex HFT is informational software — not investment advice. Past performance does not guarantee future results.
A June 2026 Reuters poll of economists indicates the European Central Bank will raise its key deposit rate by 25 basis points next month and deliver another hike in September. This would mark a decisive shift from the rate-cutting cycle that commenced in late 2025, bringing the benchmark rate to a projected 3.25%. The move, reported by investing.com, is a direct response to persistent services inflation and strong wage growth data published in May 2026, which have forced a policy reassessment.
The ECB’s last major tightening cycle concluded in September 2023, when it paused after ten consecutive hikes that brought the deposit rate to a record 4.00%. Markets had widely anticipated a sustained easing trajectory beginning in 2025 after inflation initially cooled. The current macro backdrop is defined by a EUR/USD rate near 1.0850 and a German 10-year bund yield of 2.45%. The catalyst for the expected policy reversal is the May 2026 flash Harmonised Index of Consumer Prices data. Headline inflation held steady at 2.4%, but the critical services component accelerated to 4.1% year-on-year. Concurrently, negotiated wage growth for Q1 2026 was reported at 4.5%, significantly above the 3% level the ECB considers consistent with its 2% inflation target.
The median forecast from 75 economists surveyed projects the deposit facility rate rising to 3.00% in June 2026 and 3.25% in September. Money markets had priced in a 92% probability of a June hike following the inflation data release. The euro has strengthened approximately 2.8% against the U.S. dollar since the start of May 2026. The policy-sensitive 2-year German Schatz yield has jumped 35 basis points to 2.15% over the same period. This contrasts with the U.S. 2-year Treasury note yield, which has been relatively range-bound near 4.70%. The table below illustrates the shift in terminal rate expectations:
| Period | Expected Terminal Rate |
|---|---|
| April 2026 Forecast | 2.50% |
| Post-May 2026 Data | 3.25% |
European bank stocks, particularly those with large domestic deposit bases, stand to gain from a steeper yield curve and improved net interest margins. Tickers like ING and BNP Paribas could see earnings upgrades of 5-7% for 2027. Conversely, rate-sensitive sectors face headwinds. Real estate investment trusts (REITs) like Vonovia and utilities such as Enel are vulnerable due to their high debt loads and dividend-focused investor base, with potential valuation compression of 8-12%. A key counter-argument is that aggressive tightening could stifle the fragile Eurozone recovery, particularly in manufacturing-heavy Germany. Flow data shows institutional investors have been rotating out of European growth stocks and into short-duration credit and financials over the past two weeks.
The next critical catalyst is the ECB’s policy meeting on 11 June 2026, where the first hike is expected. The subsequent meeting on 10 September is the focal point for the projected second hike. Traders will scrutinize the July 2026 Q2 wage growth data, due 31 July, for confirmation of the persistence of labor cost pressures. Key technical levels for the EUR/USD are resistance at the 1.0980 200-day moving average and support at 1.0720. A break above 1.0950 on a hawkish ECB statement would target the 1.1050 area. If wage data in July softens unexpectedly, the September hike expectation would be scaled back, likely pulling the euro back toward 1.0650.
Variable-rate mortgages, which are common in countries like Spain and Italy, will see immediate increases in monthly payments. For new fixed-rate loans, banks have already begun pricing in future ECB moves, leading to a rise of 40-60 basis points in offered rates since April 2026. This will cool housing demand and could pressure prices, particularly in southern European markets that saw rapid appreciation during the low-rate era.
The ECB has reversed course from easing to tightening before. A notable example followed the 2011-2012 sovereign debt crisis. The ECB cut rates to a then-record low of 0.75% in July 2012 to support the economy. As conditions stabilized, it began a slow normalization, but did not hike until 2019. The current situation is more rapid, driven by inflation rather than growth, making the 2026 pivot more aggressive than the post-2012 period.
Services inflation is considered more persistent and domestically generated, often reflecting tight labor markets and rising wages. Goods inflation can be more volatile and influenced by global supply chains and commodity prices, which the ECB has less control over. A sustained rise in services inflation above 4% signals that underlying domestic price pressures are becoming entrenched, requiring a stronger monetary policy response to prevent a de-anchoring of inflation expectations.
The ECB is poised to pivot from cutting to hiking rates, targeting services inflation with two 2026 hikes that markets have largely priced in.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
Vortex HFT is our free MT4/MT5 Expert Advisor. Verified Myfxbook performance. No subscription. No fees. Trades 24/5.
Position yourself for the macro moves discussed above
Start TradingSponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.