BENGALURU, March 13 - Economists surveyed between March 9-13 continue to expect the European Central Bank to keep its deposit rate unchanged for the remainder of the year, maintaining a widely held outlook that has persisted since late last year even as energy-related inflation risks re-emerge.
Global crude prices spiked sharply after the U.S.-Israel war on Iran began on the last day of February, with oil surging as much as around 70% at the peak. That surge has put renewed upward pressure on euro zone inflation expectations and has reopened memories of the cost-of-living pressures seen during the pandemic era.
Policymakers at the central bank have publicly acknowledged the inflationary threat posed by higher energy prices and indicated they stand ready to respond if any rise in inflation appears to be persistent. Market signals have already moved; Germany's rate-sensitive 2-year Schatz yield has risen roughly 40 basis points, a move that suggests investors are pricing in the possibility of tighter policy ahead. Interest rate futures are fully pricing a rate increase by the end of July and assign about a 55% probability of a second hike by the end of December.
Despite those market moves, the economists in the poll remained firmly aligned. Over 90% - 67 of 72 respondents - predicted the ECB would hold its deposit rate at 2% through 2026, an outlook reported as unchanged since October. Only three of the respondents anticipated a rate hike this year, while two expected at least one cut.
Still, forecasters warned that the outlook is fragile. "There is still no reason for the ECB to panic but installing a panic room within that 'good place' might not seem like such a bad idea for now," said Carsten Brzeski, global head of macro at ING. "At this point anything is possible from a short-lived episode of higher oil prices and some supply chain frictions to a full-blown energy crisis. The big question for the ECB is therefore no longer how to react to an inflation undershooting but rather how to react to another oil price shock."
Economists adjusted their near-term inflation projections upward to reflect the energy shock. Headline inflation, which rose to 1.9% last month from 1.7% in January, is now expected to average 2.3% next quarter, compared with an expected 1.9% in the current quarter. Those figures represent an upward revision from forecasts made in the previous month's poll, which had predicted 1.9% and 1.7% respectively. For the full year, forecasters now see inflation averaging 2.0%, up from 1.8% in last month's poll.
The euro's depreciation since the outbreak of conflict may intensify inflationary pressures. The currency has weakened by nearly 3% against the dollar since the war began, which could add to imported price pressures.
The ECB is scheduled to release updated economic forecasts on March 19. Market and analyst commentary suggests the central bank's public readiness to act could be aimed at keeping inflation expectations anchored. "The ECB is ready and willing to act to avoid a repeat of the 2022-2023 inflation shock. Saying this loudly and clearly might be the best way of ensuring that inflation expectations remain well anchored," said Mark Wall, chief economist at Deutsche Bank. "2026 is not 2022, but the risk of persistence is not negligible."
On the growth front, the poll painted a relatively steady picture. The euro zone economy grew 0.2% in the final quarter of 2025. Respondents expected quarterly expansion of between 0.3% and 0.4% through 2026, producing a full-year growth forecast of 1.2% for 2026 and 1.4% for 2027. Those growth projections were described as broadly unchanged since August.
While the consensus among economists remains for policy stability at the ECB through the coming year, several market and macro indicators underscore that elevated uncertainty persists. Oil price volatility, movements in short-term yields, and a weakening euro are among the variables that could prompt the central bank to reassess its stance if they translate into more persistent inflationary trends.
Summary
- Most economists polled expect the ECB to keep its deposit rate at 2% through 2026 despite renewed inflation risks tied to higher oil prices.
- Oil surged as much as around 70% after the U.S.-Israel war on Iran began on the last day of February; oil remains around 45% higher than before the shock.
- Headline inflation rose to 1.9% last month and is now expected to average 2.3% next quarter; full-year inflation forecast was nudged up to 2.0% from 1.8%.