IMF expects at least one more 25 bps ECB rate hike in 2026

BANGKOK, Oct 16 (Reuters) - The European Central Bank is likely to raise interest rates by 25 basis points at least one more time this year to fight high inflation, the International Monetary Fund said on Friday in its regular forecast report for Europe.

The ECB has already raised rates by 25 bps in both June and in September to counter rising inflation caused by the surge in energy prices as a result of the US-Israeli war on Iran.

"IMF analysis shows that at least one further 25 bps increase in policy rates in 2026 will be required to ensure that core inflation remains well contained," the IMF said.

"While policy beyond 2026 should evolve based on incoming data, further tightening is likely to be warranted to ensure that inflation returns to target in 2028," it said.

"Fiscal support to mitigate the effects of higher energy prices, if not carefully calibrated, could undermine disinflation efforts," the report said.

(Reporting by Jan Strupczewski; Editing by John Mair)