The ECB rate outlook points to a possible interest-rate increase in December followed by a pause, as policymakers weigh rising energy-driven inflation against the drag from higher bond yields. Three policymakers familiar with the discussions expect an increase at the December 17, 2026 meeting to be almost certain unless energy prices fall sharply and unexpectedly.

ECB rate outlook after December

The three policymakers expect a December increase to take the deposit facility rate to 2.75%, from 2.50%. They also expect the European Central Bank to pause further tightening afterward, rather than continue raising rates.

That is an expectation, not a decision. ECB President Christine Lagarde signaled the possibility of another increase in December, warning that elevated and rising energy costs were adding to inflation pressures and risks.

Bond yields add to growth concerns

In its October 29 monetary policy decision, the ECB kept its three key rates unchanged. The central bank said higher energy prices posed upside risks to inflation and downside risks to growth, while tighter financing conditions were likely to affect both. It said it would decide policy meeting by meeting and was not committing to a particular rate path.

ECB estimates circulated before the October meeting indicated that the recent rise in bond yields could reduce cumulative economic growth by 100 basis points and inflation by 90 basis points over 2027–28, compared with the bank’s September baseline projections. The estimates suggest tighter financing conditions could partly offset the inflationary effect of higher energy prices.

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