Morgan Stanley: Soaring energy prices hinder rate cuts, expect the European Central Bank to hold steady this year

ChainCatcher reports that, according to Jintou Data, Morgan Stanley became the latest Wall Street brokerage to predict that the European Central Bank will keep interest rates unchanged until 2026, citing potential inflation risks from Middle East conflicts. The brokerage previously expected the ECB to cut rates twice in June and September, but now anticipates these rate cuts will be postponed until 2027.

Last month, Bank of America Global Research canceled its forecast for a rate cut in 2026. Morgan Stanley analysts stated in a report, “Given recent rises in energy prices, the Eurozone inflation rate may rebound above the ECB’s target for the remainder of this year.” They added, “By 2027, inflation could fall back below the target again, but this depends on the rapid normalization of energy markets.”