Rabobank strategists Bas van Geffen and Elwin de Groot expect the European Central Bank to raise the deposit facility rate by 25bp to 2.75% in December, driven by higher energy price forecasts. They argue the ECB will not accelerate tightening and see upside risks if inflation broadens, but stress that energy inflation should ease from March, limiting further hikes and making any additional moves largely transitory. The strategists forecast just one additional hike, saying policymakers won't need to keep up that appearance for much longer once energy prices start to abate in March. They consider any deposit facility rate increases above the current 2.50% to be temporary, and expect the ECB to revert these in the second half of 2027. That is another reason they have not factored in a March hike, since monetary policy works with long and variable lags and the ECB will probably be looking beyond the tail-end of the energy-driven inflation spike by then.
Rabobank expects the ECB to hike the deposit rate to 2.75% in December, a policy tightening that supports the euro versus the dollar.
