Is the European Central Bank's policy shift imminent? The three major disagreements behind the rising expectations of rate hikes in 2026

【BlockBeats】The latest market signals indicate that the European Central Bank’s policy may shift. The Financial Times analysis points out that it has become a consensus expectation among investors that the ECB will keep its benchmark interest rate at 2% next week — but this is not the main focus. What truly matters is the signal revealed by President Lagarde this week: rate setters are very likely to raise their eurozone economic growth forecasts again at the meeting.

This detail is crucial. The combination of stronger growth forecasts and persistent inflation pressures has recently prompted traders to significantly increase their bets on the ECB raising interest rates next year. Trading data and swap market pricing both reflect this change, and this adjustment has only recently become apparent in the past few weeks.

But here’s the issue: there is still considerable debate in the market about the timing of rate hikes. Will the monetary policy direction really shift? How much room is there for discretion? Any adjustment to policy signals is expected to be very subtle — and this is exactly what traders are closely watching. George Moran, an eurozone economist at Royal Bank of Canada Capital Markets, offers a different view. He believes the ECB will not raise rates in 2026, with a straightforward reason: “The cyclical tailwind may only be temporary.” Moran added that the ECB has explicitly stated it will not overreact to temporary deviations from its inflation target.

This is where the current disagreement lies — optimists are betting on the start of a rate hike cycle, while conservatives believe the recovery is fragile and limited. Next week’s meeting statement will be a decisive moment.