Goldman economists expect ECB to raise rates by 25 basis points

Investing.com -- Goldman Sachs economists anticipate the European Central Bank will increase interest rates by 25 basis points at its meeting on Thursday.

The economists predict the ECB's inflation revisions will reflect a more persistent shock, with core inflation projections for both 2027 and 2028 expected to rise. This aligns with Goldman's analysis that energy disruptions will likely have a lasting impact.

A Bloomberg survey indicates economists remain divided on revisions to core inflation beyond this year.

The expected rate increase is already fully priced into markets. Goldman analysts stated that an outcome matching their economists' expectations should have limited impact on the currency.

EUR/USD's sensitivity to front-end rate differentials has increased from earlier this year lows. The timing and extent of additional ECB rate hikes later in 2026 could still affect the currency pair, according to the bank.

Goldman sees potential upside for the euro if the ECB views inflation pressures as more persistent and signals a low threshold for consecutive rate increases. The bank noted some room for disappointment given current market pricing.

EUR/USD downside has been limited, tracking risk sentiment and natural gas prices, which have risen modestly. This has kept the broader dollar in a range.

Goldman continues to favor the euro as a funding currency and sees risks that prolonged energy disruption will begin to constrain activity in the region more significantly.

You May Also Be Interested In

• Zscaler to cut 3% staff
• Intel (INTC) PT Lowered to $92 at Mizuho
• XTEND AI Robotics begins NYSE trading after $110M merger close