Analysts describe the announcement as hawkish. And among traders in the fixed income market, three interest rate hikes are priced in after the ECB announcement through October 2027, according to Bloomberg.
The ECB still needs to act cautiously. The economy has shown resilience over the past six months, but rapidly rising gas prices mean the negative supply shock is still growing. That will hit growth in the end, Mark Wall, an economist at Deutsche Bank, told Bloomberg.
Inflation above target
Inflation will remain above the 2 percent target for an extended period, according to the ECB interest rate announcement.
The inflation forecast for 2027 is raised to 2.5 percent, and 2.1 percent in 2028. Previously, the inflation forecast was 2.3 and 2.0 percent for the two years, respectively.
The forecast for core inflation - where energy and food prices are removed - is also adjusted slightly upwards for both years.
The growth forecast is raised to 0.9 percent this year and 1.4 percent in 2027. For 2028, the forecast remains at 1.5 percent growth.
The forecasts for both growth and inflation are described as uncertain. The risk picture regarding inflation is that it is more likely to be higher than forecast than lower than forecast, according to the ECB.
Decided from meeting to meeting
The ECB executive board is not closing the door to more hikes this year with this announcement.
The Executive Board describes itself as well-positioned in terms of monetary policy, but adds that decisions on the policy rate in the future are made from meeting to meeting depending on economic statistics.
Thursday's interest rate hike means that the deposit rate - which is usually compared to the Swedish Central Bank's policy rate - will be raised to 2.50 percent. This was in line with the average forecast among analysts, according to Bloomberg.
The increase comes after inflation in the eurozone in August was estimated at 3.3 percent by the statistical office Eurostat.
