The ECB meets on Thursday 29 October, not 28 as some calendars suggest. The decision is due at 14:15 CET, Lagarde's press conference at 14:45. Everyone agrees: rates will stay put.
Rates are 2.50% (deposit), 2.65% (refinancing) and 2.90% (marginal lending). The last 25 basis point hike came on 10 September, the second since the US-Iran war began. €STR futures price a 97% chance of a hold, and a Reuters poll on 5-8 October found 70 of 73 economists expecting the same.
Fig. 1. The ECB deposit rate and market pricing. Source: ECB, 25bp.
Fig. 2. Inflation components, September 2026. Source: Eurostat.
The September accounts point the same way: risks are skewed to the upside, but the ECB offers no guidance and notes that 2.50% remains within the neutral range. Lagarde spoke of a "measured response", Philip Lane of a meeting-by-meeting approach. Danske Bank dropped its October hike call.
The ECB's September projections see growth of 0.9%, 1.4% and 1.5% in 2026-2028, and inflation of 3.0%, 2.5% and 2.1%. The return to 2% is pushed out, but the baseline has no recession.
Fig. 3. ECB projections, September 2026. Source: ECB.
"The ECB is likely to stay on its quarterly path, delivering another hike in December. The main risk is one more, perhaps in March," said Jens Eisenschmidt, Morgan Stanley's chief Europe economist. Societe Generale notes that higher market rates already do part of the ECB's job.
Markets go further: after a 78% chance of a December hike, they imply about 3.00% by April 2027, so two or three hikes rather than one final move. That gap is the euro story.
Fig. 4. Economists versus the market. Source: Reuters, 25bp.
Rates are 2.50% (deposit), 2.65% (refinancing) and 2.90% (marginal lending). The last 25 basis point hike came on 10 September, the second since the US-Iran war began. €STR futures price a 97% chance of a hold, and a Reuters poll on 5-8 October found 70 of 73 economists expecting the same.
Fig. 1. The ECB deposit rate and market pricing. Source: ECB, 25bp.
Why a pause makes sense
Inflation accelerated to 3.8% in September, the highest since September 2023, but energy did most of the work: +18.9% year on year after +14.3% in August. Core inflation rose only to 2.5%, services to 3.2%, while non-energy industrial goods slowed to 1.1%. The energy shock is real; a broad pass-through into other prices is not visible yet.Fig. 2. Inflation components, September 2026. Source: Eurostat.
The September accounts point the same way: risks are skewed to the upside, but the ECB offers no guidance and notes that 2.50% remains within the neutral range. Lagarde spoke of a "measured response", Philip Lane of a meeting-by-meeting approach. Danske Bank dropped its October hike call.
No recession, but a slowdown
Second-quarter growth was strong: GDP rose 1.2% year on year after 0.6%. But the October PMI cooled to 51.9 from 53.1, below the 52.7 consensus; new orders weakened and hiring stalled. The index is still above 50, so growth continues, just more slowly. Industrial output fell 0.5% on the month and 1.1% year on year; unemployment is 6.4%.The ECB's September projections see growth of 0.9%, 1.4% and 1.5% in 2026-2028, and inflation of 3.0%, 2.5% and 2.1%. The return to 2% is pushed out, but the baseline has no recession.
Fig. 3. ECB projections, September 2026. Source: ECB.
What analysts say
The same Reuters poll found 64 of 73 economists expecting a 25 basis point hike to 2.75% in December. Forty of 70 see the peak at 2.75%, 24 at 3.00%; a month ago only two did."The ECB is likely to stay on its quarterly path, delivering another hike in December. The main risk is one more, perhaps in March," said Jens Eisenschmidt, Morgan Stanley's chief Europe economist. Societe Generale notes that higher market rates already do part of the ECB's job.
Markets go further: after a 78% chance of a December hike, they imply about 3.00% by April 2027, so two or three hikes rather than one final move. That gap is the euro story.
Fig. 4. Economists versus the market. Source: Reuters, 25bp.
Scenarios and risks
The base case is a pause with a nod to December. EUR/USD is near 1.1123, its lowest since April 2025, and speculators hold a large net short in the euro. The main risk is French debt: 10-year OAT yields are near 4.95%, and the spread over Bunds was the widest since 2011. A hawkish ECB would pressure the periphery; a dovish one would risk expectations.
⚠ IMPORTANT
My baseline: rates stay at 2.50% on 29 October, and a hike to 2.75% in December is more likely than not. Watch 30 October (GDP, unemployment), 4 November (October inflation) and 17 December (decision, projections).