ECB September hike remains BNP Paribas’ main call after the European Central Bank raised its key rate by 25 basis points to 2.25%. The bank said the move marked the ECB’s first increase since 2023. It also said the ECB’s updated forecasts pointed to a firmer inflation path and weaker growth.
The ECB now sees inflation averaging 3.0% in 2026, up from its March estimate of 2.6%. It also lifted its 2027 inflation view to 2.3% from 2.0%. Meanwhile, eurozone inflation rose to 3.2% in May from 3.0% in April.
The ECB linked that rise to a stronger effect from the war on energy and related costs. At the same time, it cut its growth forecasts. The bank now expects eurozone growth of 0.8% this year and 1.2% next year, down from 0.9% and 1.3%.
ECB September Hike Outlook
BNP Paribas said the decision matched its existing view. Therefore, it kept one more 25 basis point increase as its central scenario. The bank said September was the most likely timing, with rates then holding steady through 2027.
The source article said the ECB gave a clear signal toward a further September move. As a result, it said any remaining dovish reading of the decision had faded. It also said European sovereign spreads and rate-sensitive sectors could face fresh pressure as markets adjust to a higher-for-longer rate path.
Inflation and Wage Trends
BNP Paribas said forward-looking price gauges showed the energy shock was slowly spreading to other parts of the economy. These gauges included European Commission surveys and purchasing managers indices. However, the bank said this pass-through was much less intense than in 2022 and had only slightly affected finished goods prices.
BNP Paribas also said a price-wage spiral looked unlikely in this cycle. Meanwhile, the ECB expects compensation per employee growth to slow to 3.2% in 2026. It then sees that measure holding at 3.2% through 2027 and 2028. BNP Paribas said that wage path supports its view that the tightening cycle will end after one more move.
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