ECB decides on rates today – hold at 2.5% expected
After two rate hikes this year, the European Central Bank is expected to keep its deposit rate unchanged. Many economists, however, expect another step to 2.75% in December.
Symbolic image · Photo: yeowatzup / Wikimedia Commons, CC BY 2.0 (cropped and resized)
The European Central Bank (ECB) announces its rate decision on Thursday. Money markets expect no change: the deposit rate is likely to stay at 2.5%. The central bank already raised rates twice in 2026 by 0.25 percentage points each, in June and September, in response to the surge in energy prices linked to the war in the Middle East.
Price pressure has risen markedly: euro-area inflation stood at 3.8% in September, up from 2.1% in February. Energy prices were up 18.9% year on year. Core inflation, excluding energy and food, rose only slightly to 2.5%. ECB chief economist Philip Lane said in early October that the September data did not show a broad, lasting rise in core inflation. ECB President Christine Lagarde told the European Parliament that long-term interest rates had risen significantly since the last meeting.
The sharp rise in French government bond yields has also tightened financing conditions, economists at consultancy RSM write. Like most analysts in a Bloomberg survey, they expect a final hike to 2.75% in December. Money markets are even pricing in two to three more steps over the next 12 months. According to RSM, the path ahead depends mainly on energy markets – European gas storage is relatively low, leaving markets exposed to a price spike if winter is colder than expected.