2.75% in December: Economists agree ECB will raise rates, Reuters poll shows

2.75% is the expected December deposit rate for the European Central Bank (ECB). A Reuters poll released on Thursday points to a 25 basis point increase, with all 71 economists surveyed forecasting a rise next month. Among them, 46 predict the deposit rate will peak at 2.75%. The remaining 25 anticipate a further increase, most likely in the first quarter of 2027.

Compared with a month earlier, economists have revised their inflation projections upwards. They now forecast Eurozone inflation at roughly twice the ECB’s 2% target until at least the second quarter of 2027.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Average inflation is now forecast at 3.1% for 2026 and 2.8% for 2027, compared with 3.0% and 2.6% in the October poll. Economists also anticipate an acceleration in core inflation, with averages of 2.6% this quarter and 2.8% in the first quarter of 2027.

Growth forecasts have strengthened as well. Eurozone economic expansion is now projected at 1.1% in 2026 and 1.3% in 2027. The corresponding forecasts in the October poll were 1.0% and 1.2%.

ECB: Key Questions Answered

The ECB’s Role and Its Impact on the Euro

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank. Responsibility for the region’s monetary policy and interest rates rests with the ECB. Maintaining price stability is its primary mandate, with inflation kept at around 2%. Interest rate increases and cuts are its main means of pursuing that objective. Higher interest rates relative to elsewhere generally strengthen the Euro; lower rates tend to have the opposite effect. Monetary policy is decided by the ECB Governing Council, which meets eight times a year. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, including ECB President Christine Lagarde.

Quantitative Easing (QE): How It Works and Affects the Euro

Faced with extreme conditions, the European Central Bank may deploy Quantitative Easing (QE). Under this policy, the ECB prints Euros to purchase assets from banks and other financial institutions, typically government or corporate bonds. The Euro generally weakens as a result. When interest rate cuts alone are unlikely to deliver price stability, QE provides a last resort. The ECB deployed it during the Great Financial Crisis in 2009-11, again in 2015 as inflation remained persistently low, and during the COVID pandemic.

Quantitative Tightening (QT): How It Works and Affects the Euro

Once an economic recovery takes hold and inflation begins to climb following QE, Quantitative tightening (QT) reverses that policy. Under QE, the European Central Bank (ECB) supplies liquidity to financial institutions by purchasing government and corporate bonds. Under QT, it ceases additional bond purchases and no longer reinvests the principal repaid as its existing bond holdings mature. The effect on the Euro is generally positive, or bullish.