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Nordea’s Chief Analyst Jan von Gerich expects the ECB to stay on hold for now while closely monitoring how the Middle East conflict affects Euro-area growth and inflation. He argues that higher and prolonged energy prices, tight labour markets and sticky services inflation raise upside risks to ECB rates. Nordea still forecasts the first rate hike in the second half of next year, but sees rising risk of an earlier move. ECB vigilance as energy risks build “The ECB will remain on hold for now, but it will carefully assess, what consequences the conflict in the Middle East will have on the euro-area growth and inflation outlook. Amidst all the uncertainty, upside risks to ECB rates have increased.” “We tend to think that a prolonged episode of clearly higher energy prices would lead to tighter rather than easier monetary policy, given that central bankers vividly remember the inflation shock from 2022, when the ECB was somewhat late to tighten.” “We also keep our baseline ECB forecast unchanged for now, still seeing the first interest rate hike in the second half of next year, though we note that the risk of an earlier hike has risen.” “In addition, fresh data suggest the labour market remains rather tight, with unemployment falling to another record low in January, while services inflation remains sticky.” “Given the recent events, the monetary policy account from the ECB’s February meeting is largely old news, but for what it is worth, it also presented a long list of various risks, one of them being the concern towards higher energy prices.” “It was interesting that the account mentioned research suggesting that geopolitical risk shocks acted like adverse supply shocks, with a persistent, positive effect on inflation that led to an upward shift in the entire distribution, though not everybody…

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Filed under: News - @ March 5, 2026 4:19 pm