Banco Santander analysts say they expect the ECB to characterize rate rises as a
policy adjustment to high energy prices rather than the start of a tightening
cycle. In their base case they forecast 50bp of hikes in 2026 — June +25bp and
September +25bp — taking the deposit facility rate to 2.5%. As the energy shock
fades, they expect a 50bp cut in 2027. They add that in a severe scenario where
US‑Iran talks collapse after summer, the ECB could raise rates to 3.75% by
end‑2026.
