ECB Press Conference: Lagarde speaks on policy outlook after leaving key rates unchanged

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to leave key rates unchanged at the October policy meeting and responds to questions from the press.

ECB press conference key takeaways

"Incoming data suggests economy is expanding in Q3."

"Growth should be underpinned in the near term."

"Renewed energy price increases, financing costs hurt confidence, growth."

"AI investment, government spending should support growth, exports should pick up."

"Fiscal sustainability is the key anchor."

"Early stages of pricing chain point to upward pressure."

"ECB wage tracker points to 2.5%-2.8% in remaining months of 2026."

"Most measures of longer-term inflation expectations stand at around 2%."

"Energy prices have increased beyond baseline."

"Energy will rise inflation further in the medium term."

"Headline inflation will likely remain well above target in coming quarters, thereafter decline in energy inflation should bring down headline inflation."

"Worsening of market sentiment could tighten financing conditions, dampen demand."

"Fiscal uncertainty could hurt confidence."

"We have seen an increase in indirect effects from the energy price surge."

"Cost of long-term financing clearly increased vs September."

"Governing Council debated whether a rate hike was appropriate."

"Based on uncertainty, unchanged underlying inflation, Governing Council decided unanimously to hold."

"The inter-meeting period will be information-rich."

"Six weeks of additional time will give us a lot more information."

"Underlying inflation will probably take particular standing in decision."

"We look at the 10-year but also at entire bond curve."

"Debt issuance by hyperscalers plays a role in yield rise."

"Countries with high debt have to factor into fiscal policy plan that rates are higher, will probably remain higher."

"Fiscal plans have to comply with EU fiscal framework."

"Should market developments threaten transmission, we have instruments to respond."

"Direction of travel is quite clear on rates."

"We have no plan to restrict number of meetings."

"Business continuity has never failed at ECB, confident it will continue."

This section below was published at 13:15 GMT to cover the European Central Bank's policy announcements and the immediate market reaction.

The European Central Bank (ECB) announced on Thursday that it left key rates unchanged following the October policy meeting, as expected. With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility stood at 2.65%, 2.9% and 2.5%, respectively.

In its policy statement, the ECB noted that energy prices in the Eurozone have continued to rise, posing upside risks to inflation outlook and downside risks to growth outlook.

ECB policy statement key takeaways

"While full effects of energy shock are still unfolding, underlying inflation has remained broadly stable so far and wages do not show a material response at this stage."

"ECB remains well positioned to navigate current elevated uncertainty."

"Will follow a data-dependent and meeting-by-meeting approach to determining appropriate monetary policy stance."

"In particular, ECB’s interest rate decisions will be based on its assessment of inflation outlook and risks surrounding it, in light of incoming economic and financial data, as well as dynamics of underlying inflation and strength of monetary policy transmission."

"ECB is not pre-committing to a particular rate path."

"Pandemic Emergency Purchase Programme (PEPP) APP and PEPP portfolios are declining at a measured and predictable pace, as Eurosystem no longer reinvests principal payments from maturing securities."

"ECB stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2% target in medium term and to preserve smooth functioning of monetary policy transmission."

Market reaction to ECB rate decision

EUR/USD came under modest bearish pressure with the immediate reaction to the ECB policy announcements and was last seen losing 0.4% on the day at 1.1110.

Euro Price This week

The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Canadian Dollar.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

This section below was published as a preview of the European Central Bank's policy decisions at 08:00 GMT.

The European Central Bank is expected to leave its benchmark interest rate steady at 2.50% after two rate hikes so far in 2026.
ECB President Lagarde is likely to hint at further monetary tightening, amid high price pressures.
The Euro risk remains skewed to the downside amid high Oil prices and France jitters.

The European Central Bank (ECB) concludes its two-day monetary policy meeting on Thursday and will announce its decision at 13:15 GMT. The bank is widely expected to leave the interest rate on the Main Refinancing Operations (MRO) and the Deposit Facility unchanged at 2.65% and 2.50%, respectively, after having raised both of them by 25 basis points (bps) in September.

Update (11:20 GMT): The European Central Bank (ECB) announced on Thursday that President Christine Lagarde has informed the Governing Council that she will resign from her position on February 7, 2027.

Alongside the decision, the bank will release its Monetary Policy Statement, although the main focus of the event will be the press conference of ECB President Christine Lagarde, due at 13:45 GMT. Her comments to journalists will be carefully analysed to confirm market expectations of a third rate hike in December.

The Euro (EUR) is likely to draw some support from an unequivocally hawkish ECB message on Thursday, but the risk is strongly skewed to the downside. High Oil prices and investors’ concerns about France’s fiscal health are a heavy burden for the common currency, which might suffer a significant blow if Lagarde cools market hopes of a December hike.

What to expect from the ECB interest rate decision?

Markets are practically fully pricing in a monetary policy pause by the European Central Bank on Thursday. The ECB hiked rates by a quarter-point in September, following a previous hike in June, and they will want to assess the impact of the latest move before raising borrowing costs again – although the hot inflation pressures rule out any accommodative gesture.

Eurozone consumer inflation accelerated to a 3.8% year-on-year rate in September, the highest level in three years, up from 3.2% in August, fuelled by a nearly 19% yearly increase in energy prices. Oil, the main inflation driver, is about 50% above July lows and is likely to remain at high levels for some time, considering the uncertain and volatile situation in the Middle East.

Core inflation, on the other hand, has remained steady, providing some leeway for the ECB. The bank has also denied evidence of strong second-round inflationary effects, which adds to the case for a pause, but the steep increase in headline inflation must have set policymakers on alert.

Yet inflation will not be the only topic at the ECB’s committee on Thursday. France’s surging borrowing costs have raised all the alarms in bond markets, pushing the spread with the German Bund to levels not seen since the 2009-2011 financial crisis. Against this backdrop, speculation about a bond-buying toolkit from the ECB, namely the Transmission Protection Instrument (TPI), has arisen, although the chances of it being activated this week are remote

All things considered, ECB President Christine Lagarde will have to fine-tune its language to make everybody happy. Keeping inflation anchored is the bank’s main target, and, in that sense, she will be forced to hint at further interest rate hikes in the coming months. That said, recent Eurozone data suggests that economic growth remains frail, while surging bond yields are already tightening financial conditions and easing pressure to raise interest rates immediately.

Analysts at Brown Brothers Harriman point out that October's ECB survey “showed a further net tightening of credit standards and weaker loan demand in Q3,” a combination that “is a headwind to Eurozone economic activity and challenges the nearly 75bps of ECB hikes priced by markets over the next twelve months.”

With futures markets pricing in more than 80% odds of a quarter-point rate hike in December, the risk is on a too-dovish Lagarde, which might further undermine speculative support for an already weak Euro.

How could the ECB meeting impact EUR/USD?

The Euro has been falling against its main peers over the last few weeks. Concerns about the potential consequences of Oil prices above $100 for a protracted period of time, coupled with France’s debt problems and social unrest spreading through the country, have spooked investors away from the common currency in October.

The EUR/USD pair has dropped nearly 5% over the last two months, hitting 17-month lows just above 1.1100; the EUR/GBP depreciated about 2.8% in the same period, while the EUR/JPY lost about 6% of its value.

These figures highlight the importance of a hawkish ECB stance at Thursday’s meeting. Monetary policy expectations are unlikely to lift the Euro on their own, but they might help to ease bearish pressure, especially if they are accompanied by a clear commitment to support France.

From a technical perspective, Guillermo Alcalá, FX Analyst at FXStreet, sees the Euro’s bearish cycle as overstretched, but observes that “the EUR/USD pair’s inability to return to the upper range of the 1.1200s keeps the negative trend fully in play.”

The daily chart shows early signs that bearish momentum is losing strength, but the Relative Strength Index (RSI) remains below 40, suggesting that bulls are absent, although the Moving Average Convergence Divergence (MACD) histogram has popped up above zero.

“Bulls should break the resistance area at 1.1255, which has been holding upside attempts in October, and shift the focus to the late-June lows, near 1.1325 to confirm a trend reversal,” says Alcalá.

Failure to do so, according to the FXStreet expert, would increase pressure towards the year-to-date low at 1.1113, and the 61.8% Fibonacci retracement of the June-August rally, at 1.1095, ahead of the late May 2025 lows at 1.1050.

Economic Indicator

ECB Rate On Deposit Facility

One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

Economic Indicator