European Central Bank Expected to Keep Rates Steady on Thursday

The European Central Bank (ECB) is preparing to keep interest rates unchanged on Thursday to assess rising borrowing costs in France and the impact of the war in the Middle East on energy prices.

The European Central Bank (ECB) is expected to keep interest rates steady at its meeting on Thursday. Nearly all economists surveyed by Bloomberg between October 16 and 21 predict that the ECB will maintain the deposit rate at 2.5 percent. Economists forecast that the bank will proceed with its third and final rate hike in December. While inflation in the eurozone approaches the targeted 2 percent level, price increases remaining largely limited to the energy sector provide policymakers with room to maneuver. Conversely, weakening growth momentum and rising bond yields complicate the decisions.

High budget deficits and social unrest in France, in particular, are putting pressure on the bond market, reviving concerns over a debt crisis in the eurozone. Bloomberg Economics analysts David Powell and Simona Delle Chiaie state that rising borrowing costs are tightening financial conditions and that it is almost certain the ECB will pause rate hikes at its October meeting. Attention will also be focused on the messages ECB President Christine Lagarde will deliver following the decision regarding energy prices, the inflation outlook, and the situation in France. Markets are also eyeing the eurozone third-quarter growth data and October inflation figures to be released on Friday.