Goldman Sachs and BNP Paribas have revised their forecasts for a September rate cut by the European Central Bank, now predicting no further easing this year following the ECB’s decision to keep rates unchanged. The two financial institutions now anticipate a potential rate hike in the fourth quarter of 2026, citing a resilient economy and the possibility of a tariff deal between the EU and the U.S.
After cutting interest rates eight times since June 2024, the ECB opted to maintain policy rates at 2% during its recent meeting. ECB President Christine Lagarde expressed confidence in the current state of the economy, indicating that the Governing Council may refrain from making any changes to interest rates unless there is a significant deterioration in the economic outlook.
HSBC also echoed the sentiment that the ECB is unlikely to implement further rate cuts, while J.P. Morgan has pushed back its forecast for a rate cut from September to October. The uncertainty surrounding EU-U.S. trade negotiations has added to the complexity of the situation, with reports suggesting a potential agreement that includes a 15% tariff on EU goods.
Despite earlier threats from President Trump to impose 30% tariffs on EU imports starting August 1, there is now speculation that a lower tariff rate may be more probable. Additionally, brokerages like Morgan Stanley and UBS have signaled increased uncertainty regarding a possible rate cut in September, with the former suggesting that the ECB may choose to maintain current interest rates until December if economic data surpasses expectations.
Overall, the outlook for ECB policy decisions remains fluid, with market analysts closely monitoring economic indicators and trade developments for potential signals of future actions. The evolving landscape of global trade relations and economic conditions will continue to influence the central bank’s policy direction in the coming months.
(Reporting by Siddarth S and Akriti Shah in Bengaluru; Editing by Ronojoy Mazumdar)
