DWS: Next ECB rate hike in September

DWS: Next ECB rate hike in September

June 12, 2026

Interest Rates ECB

Ulrike Kastens, Senior Economist at DWS, comments on the ECB meeting and rate hike:

The ECB’s mandate is clear: price stability. In light of the recent increase in inflation and the latest projections — which point to a significant deviation from the target in 2026 and 2027 — we believe that raising the deposit rate to 2.25% was an appropriate response to rising inflation risks.

ECB President Lagarde has repeatedly emphasised the need to closely monitor future inflation trends. While longer-term inflation expectations remain relatively well anchored, this is less true for short-term expectations, particularly among consumers. No second-round effects have yet been observed, as wage growth has remained moderate so far.

Overall, however, price pressures have broadened. As the latest GDP projections point to a moderate economic environment, we currently consider the risk of pronounced second-round effects to be limited.

When asked whether a rate hike could come as early as July, the ECB President emphasised data dependence and the absence of any pre-commitment to a specific interest rate path. In this context, she also referred to her March speech, in which she outlined possible monetary policy responses under various scenarios.

If an energy price shock were to lead to a not too persistent overshoot of the inflation target, some adjustment of monetary policy would be warranted. While we do not expect today’s rate hike alone to be sufficient to contain inflationary risks, we nevertheless consider a meaningful tightening in real monetary policy terms unlikely given the current economic backdrop. We continue to expect another rate hike to 2.50% in September.

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