- The ECB held its deposit facility rate at 2.5% on Thursday, meeting market expectations, following a 25 basis point hike in September.
- Euro area headline inflation hit 3.8% last month, the highest since September 2023, with energy price inflation at 18.8% amid Middle East turbulence.
- The Governing Council said underlying inflation and wages were broadly stable, and Lagarde said the bank is not seeing second-round effects beyond the September projections.
- Lagarde cited higher energy costs and a sharp rise in long-term financing costs, with the average 10-year sovereign yield up about 35 basis points since the last meeting.
- Lagarde announced earlier on Thursday that she will step down as ECB president; Deutsche Bank's Mark Wall said the institution is bigger than the person but uncertainty remains.
- The euro area economy continued to expand in Q3, with services recovering since the Middle East conflict began, and AI investment is boosting manufacturing, digital services and exports.
Quotes
“At this point in time we are not seeing second round effects in addition to what is already included in the projections”
“We expect one more hike to 2.75% in December while Lagarde is still President, and that's probably the end of the hiking cycle.”