ECB officials signal readiness to raise interest rates in December

The bank has raised rates twice this year, most recently in September, and Lagarde says its rates now sit at the top of the neutral range.

ECB officials have signalled they are ready to raise interest rates in December.

The ECB has raised rates twice this year, and the latest rise came in September. Kazimir called the September rise inevitable. Lagarde said ECB rates sit at the top of the neutral range, the band where rates are seen as neither holding back nor boosting growth.

The inflation picture is mixed. Lagarde said wages show no material response to the energy shock, and she saw no sign of second-round effects, meaning price rises spreading into wages and prices more widely. She flagged upside risks to inflation and downside risks to growth. Euro-area core inflation reached a fresh high after a Spanish inflation reading, and De Marco said stronger core inflation could justify action. The ECB's monthly consumer survey shows households' one-year inflation expectations at 3.0% and three-year expectations at 2.9%, both up from July.

Market bets have moved with the signals. On 28 September, traders saw under a 40% chance of an ECB rate rise in October. That chance fell back in October after officials flagged mixed signals on inflation and wages. JP Morgan now expects a rise in December and another in March 2027, reversing its earlier call for rates to stay on hold through 2027.

This follows weeks of mixed messages from Council members. Simkus and De Marco have cited stronger data, while Lagarde has stressed that price pressures have not broadened. Lagarde also noted that longer-dated yields have risen across the world, so markets may have priced some of this tightening before any formal vote. Long-dated Treasurys have already reacted to this kind of hawkish shift in earlier episodes, and this statement reinforces that pattern rather than reversing it.