European Economics Analyst ECB Preview—Another Hike Without Guidance

Economics Research 4 September 2026 | 10:58AM BST

ECB Preview—Another Hike Without Guidance

n We expect the Governing Council to hike the policy rate by 25bp next week, as Sven Jari Stehn | widely expected and fully priced. Investor focus will be on the updated staff Goldman Sachs International

projections and President Lagarde’s commentary on the policy outlook during Alexandre Stott | the press conference. Goldman Sachs Bank Europe SE - Paris Branch n We look for a small upgrade to the growth projections of 0.1pp in each of 2026 and 2027, motivated by the economy’s recent resilience. The inflation projections will likely be revised down by 0.1pp in 2026, for both headline and core, on account of weaker data than the staff had been anticipating. But we expect the 2027 projections to rise by 0.4pp to 2.7% for headline and by 0.1pp to 2.6% for core, given the increase in spot and forward energy prices. We look for no changes in 2028, although the bar for core to be revised down 0.1pp to 2.1% is probably quite low. n The Council’s description of the economy, the risk assessment (with downside risks to growth and upside risks to inflation), and the formal policy language are likely to remain broadly the same. We expect President Lagarde to leave options open during the press conference by stressing the Council’s data-dependence. The dovish risks are that she highlights the weaker inflation data or signals a growing hurdle to hike further. The hawkish risks are that she conveys greater concern around the increase in energy prices and the length of the projected inflation overshoot, or implicitly endorses market pricing of almost four hikes. n We maintain our view that September is more likely than not the last hike of this tightening cycle given our forecast for below-trend H2 growth, modest further core pressures, our forecast for lower energy prices than currently implied by forwards, and no Fed hikes. That said, we now see a low hurdle for a third hike in December if energy prices do not fall from here or inflation firms more notably, especially if the Fed hikes in coming months. We update our policy scenarios with a greater skew towards further hikes but our probability-weighted forecast remains below market pricing.

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Goldman Sachs European Economics Analyst

ECB Preview—Another Hike Without Guidance

The incoming data in recent months have been broadly in line with the ECB staff’s June projections.

Growth has again been firmer than expected. GDP surprised to the upside in Q2, printing at around 0.30%qoq (non-annualised) excluding Ireland (Exhibit 1, left). The activity data for Q3 has so far been more mixed as soft data continued to recover from Q2 lows, but hard data showed some sign of softening in July, most notably in Germany (Exhibit 1, right). Our nowcast model currently points to ex-Ireland growth of 0.19% for Q3.

Exhibit 1: Growth Has Been Somewhat Firmer than Expected

Source: Goldman Sachs Global Investment Research, Haver Analytics, Markit

Several ECB officials acknowledged the economy’s recent resilience, and both Executive Board member Schnabel and Bank of Ireland Governor Makhlouf hinted at a small upgrade in the projections for growth. We therefore look for the staff to lift Q3 by 0.1pp to 0.3%, which will likely raise the annual averages by 0.1pp each to 0.9% in 2026 and 1.3% in 2027 (Exhibit 2). We look for the 2028 figure to remain unchanged at 1.5%, although we see a low bar for it to fall back to 1.4%.