ECB interest rate hikes expected as inflation remains persistent

Analysts from major investment firms are increasingly anticipating further interest rate hikes by the European Central Bank (ECB). Following a 25 basis point increase in September, discussions have shifted from whether the ECB will raise rates to how high they will go and for how long. Deutsche Bank suggests a new increase in December is consistent with current trends, while Morgan Stanley has revised inflation forecasts upward, projecting harmonized inflation at 2.9% by 2027.

In Greece, the prolonged period of high interest rates poses specific challenges for economic growth and business lending. While Greek public debt remains largely shielded by fixed interest rates and long maturities, the cost of borrowing for businesses is directly impacted. According to the Bank of Greece, new business loans with variable rates have seen average costs around 4.21%, with higher rates for small and medium-sized enterprises. The IMF expects Greek debt to decrease to approximately 110% of GDP by 2031, despite the tightening monetary environment.