After June's hike, the ECB left the deposit rate at 2.25% on 23 July. Forecasts made at the start of the year pointed the other way, which is the first thing to keep in mind before reading any second-half projection.
At its meeting on 23 July, the ECB Governing Council held the deposit facility rate at 2.25%, the main refinancing rate at 2.40% and the marginal lending rate at 2.65%. These are the levels set in June, when the bank raised rates by a quarter point after nearly a year of stability. The decision to wait was unanimous, though some governors argued during the discussion for moving immediately.
That sequence deserves a pause. Twelve months ago the consensus described a downward normalisation path, with the deposit rate settling near 2% or falling further. An exogenous variable reversed it: the energy shock tied to renewed conflict in the Middle East and its effect on oil and gas prices. Christine Lagarde was blunt about it, conceding that concern is real and that decisions based on concern alone would already have produced a hike.
What forecasts say now, and with what margin
Asset managers converge on a September increase. Ulrike Kastens of DWS expects the deposit rate to reach 2.50% alongside the new macroeconomic projections, with similar readings from PIMCO and J. Safra Sarasin. Karsten Junius of the latter supplies the quantitative anchor: Brent trades around $85 a barrel, close to the $88 baseline the ECB built in June.
That is where caution belongs. The entire forecasting structure rests on energy prices staying near that baseline. A twenty-dollar move either way would shift the inflation projections and the September decision with them. The ECB acknowledges as much, reaffirming its meeting-by-meeting approach and declining forward guidance. The forecasts made six months ago failed not because they were poorly built but because the decisive variable sat outside the model. There is no reason to think the model has since become complete.
The transmission channel to property
On debt the effect is already visible. Euribor, which anticipates expectations about future decisions, moved sharply through May and June and already prices much of the expected increase. IRS rates, the reference for fixed-rate lending, reflect longer-horizon expectations and move on a different timetable, but in the same direction. For borrowers today, the room banks have for aggressive pricing is narrowing. Existing variable-rate borrowers face a pause rather than a reversal.
For institutional investment the reasoning is subtler. Prime yields absorbed a severe repricing between 2022 and 2024, which restored levels consistent with a higher cost of money. Italy closed the first half of 2026 with €7.06 billion invested, up 28% year on year according to BNP Paribas Real Estate research. That is a strong figure, but it describes transactions negotiated six to nine months earlier, under different rate conditions. The lag between investment decision and completion makes half-year totals a photograph of the recent past rather than a directional indicator.
The informative number will be the second half, and specifically the composition of volumes. If core transactions with modest leverage gain share at the expense of debt-dependent value-add strategies, the market has begun pricing the new scenario. If volumes hold with unchanged composition, investors are betting the hike was isolated.
One qualification matters. None of this amounts to a return to 2022 conditions. A deposit rate of 2.25%, or even 2.50%, sits well below the 4% peak of the tightening cycle, and the spread between prime property yields and government bonds is wider than it was then. What has changed is direction, and with it the expectations structure underpinning three- and five-year investment plans.