🏦🇪🇺ECB Tightening Viewed As Temporary: Cable FX Macro
- Rosbel Durán
- 2 hours ago
- 1 min read
End-2026 Markets are pricing a peak close to 2.50-2.75% with the highest probability mass centered at 2.50%. This is in line with the Reuters poll which shows >60% of economists expecting one more hike this year (most likely September).
2027: The ECB’s own Survey of Professional Forecasters (Q2 2026) expects average DFRs of about 2.25% for 2027, with the modal outcome closer to 2.00–2.25%. Previous Bloomberg surveys had also suggested a partial reversal in 2027 to protect growth. That means markets aren’t pricing in a high terminal rate for the cycle yet – any 2026 tightening would be transitory.
Back of the envelope cross-check from the €STR OIS/swap market (levels as of early June): 1-year rates around 2.32% and 2-year around 2.51% are consistent with an average expected short rate in the 2.3-2.5% zone over the next 1-2 years (low term premium in OIS).
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