The key message

The European Central Bank held all three policy rates on 29 October 2026, but the press conference brought the hike debate into the open. The deposit, main refinancing and marginal lending rates remained 2.50%, 2.65% and 2.90%.

Decision and guidance

The ECB said rising energy costs created upside inflation risk and downside growth risk. Underlying inflation and wages had not yet shown a material second-round response, while tighter financing conditions were already weighing on activity. President Christine Lagarde said policymakers discussed a hike before unanimously holding and would remain data-dependent without pre-committing to a path.

Market interpretation

Post-meeting pricing assigned roughly a two-thirds probability to a December hike. That is not a promise: the ECB must judge whether the energy shock is becoming embedded in wages and expectations against the drag from already-higher bond yields and borrowing costs.

Why it matters

Energy-intensive manufacturers face both input-cost and financing pressure. Banks, utilities, infrastructure and energy producers may respond differently depending on curves, credit quality and regulation. EUR/USD and sovereign spreads—especially in highly indebted countries—remain key transmission channels.

What to watch

Euro-area inflation, wage growth, energy prices, EUR/USD, core sovereign yields and peripheral spreads before the 17 December meeting.

Sources: ECB monetary policy decision and press conference, 29 Oct 2026; Reuters meeting coverage.

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