Santander: ECB to Adjust Policy, Not Start Tightening Cycle; 50bp Hikes Expected in 2026

According to Santander Bank analysts reported by Jin10 on June 8, the European Central Bank will characterize its rate hikes as a policy adjustment to high energy prices rather than the start of a tightening cycle. Santander expects the ECB to hike rates by 50 basis points in 2026, with 25 basis points in June and 25 basis points in September, bringing the deposit rate to 2.5%. The bank forecasts a 50 basis point rate cut in 2027 as energy shocks subside. However, analysts note that in a severe scenario involving U.S.-Iran negotiations breaking down in summer, the ECB could raise rates to 3.75% by end-2026.
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