Markets assume that the ECB will keep rates at 2.5% in its upcoming meeting. The provisional average Euribor for October decreases compared to September and stands at 3.227%.
The European Central Bank (ECB) will keep its interest rates unchanged at the meeting of its Governing Council next Thursday, according to nuevaradio.org based on analysts' forecasts. The deposit facility would remain at 2.50%, the main refinancing operations at 2.65%, and the marginal lending facility at 2.90%.
Markets assign a probability of 97.6% that the institution will keep rates stable following the 25 basis point increase implemented in September. For those with variable-rate mortgages, the news comes with additional relief: the provisional average Euribor for October decreases compared to September and stands at 3.227%.
The decision is made despite the rise in inflation. According to data from Eurostat, the eurozone's CPI closed September at 3.8%, up from 3.2% in August, driven by energy, whose prices rose by 18.8% year-on-year. Core inflation remains at 2.5%, one-tenth higher than the previous month.
Mabrouk Chetouane and Romain Aumond, strategists at Natixis, agree on the pause scenario:
“the European Central Bank will keep all its official interest rates unchanged”
Konstantin Veit, portfolio manager at Pimco, also rules out an additional increase in October. He believes there are no clear signs that the rise in inflation will consolidate in a lasting manner.
However, experts do not rule out a new increase of 25 basis points before the year ends. Attention will focus on the press conference following the meeting, where Christine Lagarde, ECB president, could provide hints about the next steps. Natixis analysts believe she may mention the risks of financial fragmentation in the eurozone.
Annalisa Piazza, fixed income manager at MFS Investment Management, points out that the key is whether Lagarde confirms a greater monetary tightening or suggests that the recent decline in the bond market is already part of the ECB's work.
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