FX.co ★ ECB Poised to Hold Rates as Traders Look Ahead to December

The European Central Bank is widely expected to leave interest rates unchanged on Thursday, holding its main refinancing rate at 2.65% and the deposit facility rate at 2.5%. Policymakers are adopting a wait-and-see stance as they assess rising inflation and the delayed impact of earlier rate hikes. The decision comes against the backdrop of France’s fiscal and political instability, which has heightened volatility across European bond markets. Higher bond yields are pushing up borrowing costs, a development that could dampen economic activity and help curb inflation, thereby potentially reducing the need for further ECB tightening. With an October pause largely priced in, investors will focus on President Christine Lagarde’s press conference for signals on the future policy path. Markets still expect a rate increase by December, with two hikes fully priced in by April 2027.