ECB officials are ready to raise interest rates in December

The bank has raised rates twice this year, most recently in September, and JP Morgan has reversed its call for rates on hold through 2027.

ECB officials are ready to raise interest rates in December, a firmer line than the Council has taken in recent weeks. The bank has raised rates twice this year, the latest rise coming in September. Kazimir called that move inevitable.

The Council has not spoken with one voice. De Marco said stronger core inflation could justify action, and euro area core inflation has reached a fresh high after a Spanish inflation reading. Lagarde has stressed that she sees no sign of second-round effects, the point at which higher prices feed into wages and then back into prices, and that wages show no material response to the energy shock. She has also said rates sit at the top of the neutral range and flagged upside risks to inflation and downside risks to growth.

Households are adding pressure. The ECB's monthly consumer survey put one-year inflation expectations at 3.0% and three-year expectations at 2.9%, both up from July.

Markets have moved too. Vujcic has said the bank has started a tightening cycle, and traders are pricing several more increases through 2027. JP Morgan now expects a December increase followed by another in March 2027. It had previously expected rates to stay on hold through 2027.

Some of the tightening may therefore be in prices before any vote. Lagarde has noted that long-end yields have already risen globally, and long-dated Treasurys have shown sensitivity to hawkish signals from the ECB before. Explicit readiness for December makes action more likely than further delay.