Nomura strategists highlight that Euro area Gross Domestic Product (GDP) excluding Ireland has been growing around potential despite the Iran war. They expect Euro area Harmonised Indices of Consumer Prices (HICP) inflation to hold at 2.8% and forecast the European Central Bank (ECB) to raise the depo rate by 25bp to 2.50% in September, with future policy dependent on the conflict’s duration.

ECB tightening signalled despite war

"The ECB can take comfort in the euro area’s economic resilience. We forecast the ECB to raise rates again in September, lifting the depo rate by 25bp to 2.50%. The path for monetary policy beyond September is largely dependent on the longevity and severity of the Iran war."

"The ECB can take comfort from the fact that economic growth held up in H1 2026, with euro area excluding Ireland GDP growing by 0.3% q-o-q each quarter, despite the Iran war."

"We expect the euro area figures to be unchanged at 2.8%, the consensus and markets pencil a marginally higher euro area figure, though this is because of their expectation for Italy, which is marginally higher than our own."

"We forecast the ECB to hike rates again in September, lifting the depo rate by 25bp to 2.50%. We believe this is a done deal, owing largely to the first Iran war shock, but has since been cemented by the re-escalation since the beginning of July. ECBspeak of late has confirmed that the ECB will likely raise rates in September, even if the re-escalation resolves swifty and even without seeing second-round inflation effects."

"Beyond September, the longevity of the re-escalation is what matters and will determine the path for monetary policy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)