Standard Chartered has updated its prognosis for European Central Bank policy, saying it now anticipates a 25-basis-point increase in June. The British bank had earlier expected no rate cuts through 2026, but recent hawkish comments from policymakers prompted the change in view.
In a note published on Thursday, StanChart cautioned that the forecast is conditional and not finalized. "We think a rate hike in June is now more likely than not, but we also see a realistic scenario where the next six weeks of data prompt a continued pause from the Governing Council," the bank said, stressing that incoming economic indicators could alter the outlook.
The ECB left its key policy rates unchanged at 2.00% on Thursday, but officials signalled borrowing costs could be lifted as soon as June as the central bank steps up efforts to curb surging inflation. The statement tied the potential for rate increases to elevated inflation risks that could intensify unless the conflict in Iran is resolved quickly.
Policymakers speaking on condition of anonymity said they were likely to raise interest rates at least twice, starting in June, unless a peace deal is reached and energy prices ease. That hawkish rhetoric has been echoed in the forecasts of several major brokerages, with a number repeating calls for two rate hikes this year beginning in June.
Market pricing has moved to reflect the shift in tone from policymakers and institutions. Money markets are pricing roughly a 75% probability that the ECB will raise rates in June, based on market indicators.
Looking further ahead, StanChart projects that policy rates will eventually decline back to 2.00% by mid-2027, assuming inflationary pressures ease as the direct effect of elevated energy prices fades.
Other central banks also signalled caution this week. The Bank of Japan, the U.S. Federal Reserve, the Bank of Canada and the Bank of England all kept rates unchanged while voicing concerns about price growth.
Outlook and context
Standard Chartered's shift to a June hike reflects a reassessment anchored to recent policy commentary rather than fresh commitments. The bank explicitly framed the call as contingent on the next several weeks of data, leaving room for an unchanged policy path if indicators do not support further tightening.