ECB: Second hike prospects guide Euro rates – Danske Bank

Deposit Rate Increase

2.25%

The expected new deposit rate following the ECB's hike on June 11.

2026 Inflation Forecast

2.9% y/y

Revised inflation forecast for 2026, up from 2.6% y/y.

2026 GDP Growth Revision

0.6% y/y

Adjusted GDP growth forecast for 2026, down from 0.9% y/y.

§ 01 Executive Snapshot

What: The ECB is expected to raise its deposit rate by 25 basis points to 2.25% on June 11.
Who: Danske Research Team, European Central Bank (ECB).
Why it matters: This rate hike reflects the ECB's response to inflation pressures and economic growth data, influencing Euro area monetary policy and market expectations.

Danske Research anticipates a deposit rate increase from 2.00% to 2.25% on June 11, aligning with market expectations.
Revised inflation forecasts predict a rise in 2026 inflation to 2.9% y/y from 2.6% y/y, and in 2027 to 2.2% y/y from 2.0% y/y.
GDP growth estimates are adjusted downwards, with 2026 growth revised to 0.6% y/y from 0.9% y/y and 2027 to 1.2% y/y from 1.3% y/y.

The ECB's monetary policy adjustments are influenced by rising core inflation and fluctuating oil prices, indicating a complex economic environment.
Recent growth data has shown disappointing trends, which may necessitate stricter monetary policies to stabilize the economy and control inflation.

The immediate consequence of the rate hike will be an increase in borrowing costs, potentially impacting consumer spending and investment.
Long-term implications could include a shift in market expectations regarding future ECB policy and economic growth trajectories in the Euro area.

Potential risks include the impact of continued inflationary pressures and geopolitical events on oil prices, which could affect economic forecasts.
Competition from other central banks and their monetary policies may influence the effectiveness of the ECB's rate adjustments.

The upcoming ECB meeting on June 11 will be critical for confirming the anticipated rate hike and assessing the economic outlook.
Future inflation and growth data releases will be pivotal in determining the ECB's subsequent policy direction and potential additional hikes later in the year.

§ 07

What is the expected deposit rate increase by the ECB?

The ECB is expected to raise its deposit rate by 25 basis points to 2.25% on June 11.

Why is the ECB raising its deposit rate?

The rate hike reflects the ECB's response to inflation pressures and economic growth data.

How might the rate hike affect consumers?

The immediate consequence of the rate hike will be an increase in borrowing costs, potentially impacting consumer spending and investment.

When is the upcoming ECB meeting that will confirm the rate hike?

The upcoming ECB meeting is scheduled for June 11.