The European Central Bank left its policy rate unchanged at 2.5%, matching
market expectations. ECB President Lagarde's early departure heightened market expectations.
concern over energy costs and the situation in France. The ECB, which has hiked
twice since the Iran war disrupted energy markets, opted to pause policy for
now; officials warn inflation could rise to roughly twice the 2% target (c.4%)
but say they have not yet seen oil and gas price increases spread broadly across
the economy. Euro-area growth momentum is weakening. Markets expect a further
hike in December, when the ECB will publish updated forecasts to reassess
inflation pressure; analysts view that as likely the final move in this cycle,
while investors are pricing about two additional hikes in 2027. French
developments have tightened financial conditions and are further weighing on
demand.
