Danske Bank: European Central Bank No Longer Expected to Hike Rate in October

10:59 AM EDT, 10/20/2026 (MT Newswires) -- Danske Bank Research now expects the European Central Bank to hold its key rates at its Oct. 29 monetary policy meeting, compared with its previous forecast of a rate increase. "Communication from [Governing Council] members since the September meeting has been less hawkish than [ECB President Christine] Lagarde's comments at the press conference, which initially prompted us to add an October hike to our forecast. Lagarde focused clearly on energy costs, while more recent comments increasingly also consider the demand destruction and the lack of inflationary second-round effects," analysts said in a Tuesday note. "While inflation surprised to the upside in September, rising to 3.7% y/y, the spillovers from energy costs to underlying inflation remain very muted, and firms' selling price expectations in services and retail even declined. We thus believe that the ECB is not in a hurry to hike policy rates as early as October and prefers to wait until December to deliver the next hike, when it will have more data and new projections." The research firm also now forecasts a final 25-basis-point increase to the ECB's key rates in December 2026, taking the deposit rate to a peak of 2.75%. The central bank is then anticipated to leave the deposit rate unchanged in 2027. In terms of the minimum reserve requirements for banks, Danske Bank noted the possibility of the ECB revising the percentage of the requirement next year, even if any change is announced at the upcoming October meeting.