IMF: ECB must raise interest rates at least once more in 2026

In its Regional Economic Outlook for Europe, presented in Bangkok on Friday, the International Monetary Fund (IMF) expects the European Central Bank to raise its policy rates by at least another 0.25 percentage points this year. The ECB already raised rates by a quarter point each in June and September in response to the surge in energy prices following the US-Israeli war on Iran, Reuters reported. According to the fund, further tightening is likely to be needed after that to bring inflation back to target in 2028. Government support against high energy prices could undermine disinflation if it is not carefully calibrated.

For the euro area excluding Ireland, the IMF expects growth of 1.2 percent this year and 1.1 percent next year, according to Bulgaria's news agency BTA. Central, Eastern and South-Eastern Europe is forecast to grow by 2.2 percent in 2026 – well below the average of around 3.5 percent over the past two decades. Asked by BTA about drone attacks on merchant ships in Bulgaria's Black Sea economic zone, Mateusz Szczurek, director of the IMF's European Department, said it was still too early to quantify the impact, but that it could weigh on short-term growth. The forecasts are based on data up to 30 September, before the attacks.