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2026-09-21 22:02:14
Morgan Stanley Raises Inflation Forecasts, Expects ECB to Raise Rates Again in December ⑴ Morgan Stanley economists stated in a report that the recent resurgence in natural gas and energy prices prompted a significant upward revision of their inflation forecasts. ⑵ The bank added a forecast of another ECB rate hike in December to its projections, and expects a much shallower easing cycle to follow in 2027. ⑶ Economists pointed out that energy prices alone cannot fully explain the changing outlook; Eurozone economic activity has proven more resilient than expected, thus alleviating concerns that moderate additional tightening would derail growth. ⑷ Therefore, the ECB is increasingly focused on preventing higher energy costs from spreading to other sectors of the economy, even if interest rates move further into restrictive territory. ⑸ These economists added that the energy shock has changed the discussion about inflation, but the resilience of growth has changed the discussion about policy. ⑹ Overall, Morgan Stanley views rising energy prices and growth resilience as the dual drivers of a policy shift. The focus now shifts to whether the ECB will deliver on its December rate hike, and the pace and depth of the easing cycle in 2027.
