FRANKFURT – Euro area central bankers are widely expected to stay the course on interest rates Thursday as they scramble to gauge the impact of the Iran war on consumer prices and economic growth in Europe.
Traders and analysts disagree about the next steps for the public lender, with swap market data showing the former expect at least one interest rate hike by July as a Reuters poll said the wide majority of economists anticipate no changes this year.
Headline annual inflation in the Eurozone remains near the ECB’s target range of 2% over the medium term. It rose unexpectedly to 1.9% last month from 1.7% in January, which prompted some commentators to suggest the bank could take a more hawkish stance this month.
That may now be the case, but for other reasons. “We expect the general tone of the communication to be a lot more hawkish,” ABN AMRO said in a note. “Uncertainty over the (Mideast) conflict is high.”
The “current situation” has already seen oil prices skyrocket, with Brent crude trading above USD 103/b early Wednesday after a handle of just over USD 70 ahead of the US and Israeli attacks on Iran. The jump has fuelled concerns about rising inflation, which have contributed to comments of officials turning more hawkish.
“While we expect the ECB to be alert and vigilant, the central bank is unlikely to be close to hiking rates yet,” Nordea wrote, pointing out that the message in Frankfurt will tilt away from the dovish side. President Christine Lagarde “already pledged that the ECB would not allow another inflation shock to materialise”, it noted, adding that “hawkish-leaning” Peter Kazimir, governor the National Bank of Slovakia, “warned that a monetary policy response was potentially closer than many people expected.”
New forecasts due
The latest round of updates to the bank’s staff projections are set to be published Thursday, but it will be difficult for ECB officials and the market to give to credence to an outlook produced in the early days of a war that has already expanded farther geographically than many expected.
Thus, observers said bank officials will offer a range of scenarios based on the duration of hostilities, which at the end of the day are only semi-educated guesses in an environment where US President Donald Trump is already talking about his country’s next target: Cuba. A reminder – global headlines during the last ECB decision meeting centred on Trump’s threats to seize Greenland.
Oh, and that tariff kerfuffle isn’t even close to being over.
So, with chaos remaining the geopolitical norm, ECB policymakers could be forced to adjust soon, ABN AMRO noted. Even though analysts said they expect no change this year, “If the current conflict persists and/or energy futures curves remain elevated through to the 30 April meeting, a hike becomes a distinct possibility at that time.”
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var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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- Inflation ticks higher
- New forecasts may already be old
- So what’s the scenario?
- ECB decision due Thursday at 13:15 GMT / 14:15 CET
- Press conference set for 13:45 GMT / 14:45 CET
By Eric Culp
European Editor, LiveSquawk News
@eculp.bsky.social
@EricCulpLS
18 March 2026 | 11:10 GMT
FRANKFURT – Euro area central bankers are widely expected to stay the course on interest rates Thursday as they scramble to gauge the impact of the Iran war on consumer prices and economic growth in Europe.
Traders and analysts disagree about the next steps for the public lender, with swap market data showing the former expect at least one interest rate hike by July as a Reuters poll said the wide majority of economists anticipate no changes this year.
Headline annual inflation in the Eurozone remains near the ECB’s target range of 2% over the medium term. It rose unexpectedly to 1.9% last month from 1.7% in January, which prompted some commentators to suggest the bank could take a more hawkish stance this month.
That may now be the case, but for other reasons. “We expect the general tone of the communication to be a lot more hawkish,” ABN AMRO said in a note. “Uncertainty over the (Mideast) conflict is high.”
The “current situation” has already seen oil prices skyrocket, with Brent crude trading above USD 103/b early Wednesday after a handle of just over USD 70 ahead of the US and Israeli attacks on Iran. The jump has fuelled concerns about rising inflation, which have contributed to comments of officials turning more hawkish.
“While we expect the ECB to be alert and vigilant, the central bank is unlikely to be close to hiking rates yet,” Nordea wrote, pointing out that the message in Frankfurt will tilt away from the dovish side. President Christine Lagarde “already pledged that the ECB would not allow another inflation shock to materialise”, it noted, adding that “hawkish-leaning” Peter Kazimir, governor the National Bank of Slovakia, “warned that a monetary policy response was potentially closer than many people expected.”
New forecasts due
The latest round of updates to the bank’s staff projections are set to be published Thursday, but it will be difficult for ECB officials and the market to give to credence to an outlook produced in the early days of a war that has already expanded farther geographically than many expected.
Thus, observers said bank officials will offer a range of scenarios based on the duration of hostilities, which at the end of the day are only semi-educated guesses in an environment where US President Donald Trump is already talking about his country’s next target: Cuba. A reminder – global headlines during the last ECB decision meeting centred on Trump’s threats to seize Greenland.
Oh, and that tariff kerfuffle isn’t even close to being over.
So, with chaos remaining the geopolitical norm, ECB policymakers could be forced to adjust soon, ABN AMRO noted. Even though analysts said they expect no change this year, “If the current conflict persists and/or energy futures curves remain elevated through to the 30 April meeting, a hike becomes a distinct possibility at that time.”
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