UBS Previews Next Week's ECB Policy Meeting

10:08 AM EDT, 03/10/2026 (MT Newswires) -- The Iran war is significantly complicating the policy outlook for the European Central Bank and causing much-increased uncertainty, said UBS.

Less than two weeks ago, the ECB seemed to be dealing with an inflation outlook that was broadly in line with the ECB's 2% target and a reasonably resilient economy that was about to gain more support from the gradual unfolding of the fiscal support for defense (European Union) and infrastructure (Germany), wrote the bank in a note to clients.

Now, the ECB is confronted with an energy shock that will put upward pressure on inflation and downward pressure on growth -- but its severity will depend crucially on how long the conflict will last and what disruptions it will cause, stated UBS.

In its upcoming meeting on March 19, when it will also present new macroeconomic projections, the ECB will have to acknowledge the increased uncertainty and keep its options open, pointed out the bank.

UBS "firmly" expects the ECB to keep rates on hold at 2% and reiterate that it will maintain a data-dependent, meeting-by-meeting approach and not pre-commit to a particular rate path. However, the ECB won't be able to reiterate that it sees itself "in a good place."

Instead, it will have to adopt a "wait and see" mode to gain more clarity on crucial variables, added the bank.

While the Iran war will likely dominate the ECB press conference that day, UBS also foresees questions on uncertainties stemming from the United States tariff policy and future leadership change at the ECB.

The bank thinks the ECB will have to present two or three different projections -- a first set of forecasts reflecting the outlook before the Iran war and one or two additional scenarios reflecting different durations/consequences of the conflict.

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