BNP Paribas forecasts interest rate hikes from Fed and ECB

BNP Paribas has updated its global economic outlook, predicting that central banks will implement further tightening due to persistent inflationary pressures. The bank expects the US Federal Reserve to raise interest rates by 25 basis points in both December 2026 and January 2027, bringing the federal funds rate target to a range of 4.25-4.50%. US inflation is projected to remain above the 2% target through at least 2028, with 2026 growth estimated at 2.2%.

In the Eurozone, BNP Paribas anticipates a 25 basis point hike from the European Central Bank in December, raising the deposit rate to 2.75%. While the bank expects rates to remain stable following this move, it warned that strong secondary inflationary effects could trigger additional increases. Eurozone growth is forecasted at 1.1% for 2026 and 1.5% for 2027.

Additionally, the bank predicts the Bank of England will implement a 4.00% rate hike in November as a “insurance” measure, followed by two rate cuts in the second half of 2027. For France, the bank projects weaker growth of 0.5% in 2026 with inflation at 2.5%.