ECB set for last rate hike in December but inflation risks keep door open for one more: Reuters poll

A Reuters poll of economists finds the European Central Bank is expected to deliver its final interest rate hike in December, though persistent inflation risks leave room for one more increase. The primary transmission channel is the rate differential and inflation repricing: a terminal-rate expectation anchored near the December meeting tends to compress front-end euro-zone yields and weigh on the euro against dollar-denominated assets, while the stated possibility of an additional hike keeps a residual premium in short-dated bond pricing. Euro-zone government bonds, particularly short maturities and rate-sensitive financial stocks such as banks, are most exposed to shifts in this path, since their valuations hinge directly on the expected peak in policy rates. Traders should watch the euro-zone flash HICP inflation release and subsequent ECB Governing Council commentary, as any upside surprise in core services inflation would strengthen the case for a further hike and reprice the curve accordingly.

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