European Central Bank: Widening French spreads bring communication into focus – Nordea

Sharply wider French government bond spreads and tighter financing conditions could shape the ECB’s policy tone and timing, according to Nordea’s Jan von Gerich, who notes that higher French yields affect a large part of the Euro area. He expects rates to remain unchanged at the October Governing Council meeting, while a further 25bp hike remains likely in December.

Will the ECB hold rates ahead of a December hike?

"The ECB is set to leave rates unchanged next week, with the next hike still likely in December."

"Anything other than unchanged rates at the Governing Council meeting concluding on 29 October would be a surprise."

"We stick to our baseline of 25bp hikes in December and March 2027, which would take the deposit rate to 3.00%."

"A further significant tightening in financing conditions could leave the ECB on hold for a longer period of time, but such conclusions would be premature at this point."

"However, a clearly disorderly market reaction, spreading well beyond France, could derail a December hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)