Key facts
- ECB expected to hold deposit rate at 2.5% on Thursday.
- Further rate hikes, potentially in December, are likely to be signaled.
- Money markets price in three more rate increases by the ECB.
- French government bond yields have surged due to debt concerns.
- Speculation surrounds ECB President Christine Lagarde's potential early departure.
The European Central Bank is expected to hold its key interest rate steady on Thursday, a decision widely anticipated by markets. Policymakers are grappling with persistent inflation risks, partly fueled by rising oil prices due to the Iran conflict, while also facing deteriorating financing conditions. Money markets are pricing in further rate hikes, potentially bringing the deposit rate to 3.25%. The central bank's meeting comes amid significant turmoil in French bond markets, where yields have surged due to concerns over the country's debt burden and fiscal outlook. Additionally, speculation about ECB President Christine Lagarde's future, with reports suggesting she might leave her post early, adds another layer of uncertainty.