The ECB raised rates 25bp to 2.5% on Thursday and issued a statement seen as
hawkish, but markets are almost evenly divided on a further move next month.
LSEG pricing shows a 49% probability of a Oct. 29 hike; if officials do not act
in October, markets put an 89% chance of a rate increase before Dec. 17 and a
36% probability the deposit rate reaches 3% before Christmas. ECB staff raised
2027–28 inflation forecasts citing the Middle East conflict and upgraded 2026–27
GDP forecasts on unexpectedly strong euro area resilience. ECB President Lagarde
warned the outlook remains highly uncertain, saying conditions can change
overnight — citing diesel prices — and “we cannot predict the next step.”
