The ECB rate decision on October 29, 2026, is expected to leave the deposit rate at 2.5%, with investors also watching for signals on future increases, French bond-market stress and President Christine Lagarde’s future.

Key Takeaways

  • Markets expect the ECB to hold rates after two increases since June.
  • Investors are pricing in roughly three further increases, potentially taking the deposit rate to 3.25%.
  • Lagarde is expected to face questions about speculation that she could leave before her term ends.

ECB rate decision follows September increase

The European Central Bank has raised interest rates twice since June as policymakers seek to prevent higher oil prices linked to the Iran conflict from feeding into broader inflation and wage growth. A further increase as soon as December remains a possibility, although it has not been decided.

In its September monetary policy decision, the ECB raised its three key rates by 25 basis points, taking the deposit rate to 2.50% effective September 16. The bank said it would make decisions meeting by meeting and was not committing to a particular rate path.

ECB staff projected in September that headline inflation would average 3.0% in 2026 and 2.5% in 2027, above the central bank’s 2% medium-term target.

French borrowing costs complicate the outlook

Rising government bond yields, particularly in heavily indebted France, have added to financing pressures for households and businesses. Investors have also grown concerned about France’s public debt and fiscal outlook.

The ECB has a Transmission Protection Instrument available to counter unwarranted, disorderly market moves that seriously threaten the transmission of monetary policy across the euro area. The instrument has not been used. An immediate intervention is not expected as policymakers assess whether the tensions remain contained in France or spread more broadly.

Lagarde’s future draws attention

Lagarde is expected to face questions at the press conference about speculation that she could leave before the French presidential election in spring 2027. She has approximately a year remaining in her ECB term; an early departure has not been confirmed.

Next milestone

The ECB is scheduled to publish its decision at 14:15 CET on October 29, followed by Lagarde’s press conference at 14:45 CET.

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